LANSING – In all the drama and anguish leading to the conclusion of the revenue agreement for the 2007-08 Michigan budget, probably no one expected that the final compelling drama would come down to an immediate effect vote. But in fact, the entire financial plan hung in the balance when the Senate scrambled to negotiate a way to get immediate effect on HB 5198 , which extends the sales tax on a number of business services.
In all, it took nearly 90 minutes to round up the 26 votes needed for immediate effect on the bill. The melodrama over immediate effect far overshadowed the 20-19 vote in the Senate to pass the bill, with Lt. Governor John Cherry casting the deciding vote, or the relatively easy and somewhat surprising passage of the bill in the House.
The tax on services would raise about $411.2 million for the general fund for the rest of the current fiscal year and $202.6 million for the School Aid Fund.
Treasurer Robert Kleine said negotiations on the list of services, which earlier this year embraced a group that would have raised $1 billion a year, was guided by the principle of identifying “services that people did not have to purchase and were discretionary.”
Kleine said part of the reason for delaying the implementation of the tax until December 1 is to give the agency time to create new forms and provide training for compliance with the tax. Many of the businesses responsible for collecting and forwarding the tax to the state already collect sales taxes on goods, but he said many others will be completely new to the process.
The single largest amount – $188.2 million in the 10 months the tax would be in effect in 2007-08 – would be on consulting services, which includes lobbyists’ services.
The services tax would raise about $751.3 million in 2008-09 and $766.4 million in 2009-10, with an assumed growth rate of 10 percent.
The bill includes a $100,000 appropriation for the Department of Treasury to implement the tax change, a provision that was the subject of last-minute negotiation as it precludes the tax from being subjected to a referendum.
Sen. Valde Garcia (R-Howell) said while neither he nor his caucus is happy with the services tax, “when you take a look at the alternatives, we did not have an option.” He said there was less support for raising the income tax to a higher rate, such as 4.6 percent.
While the cuts are far less than half of the $900 million package the Senate approved earlier in the process, Garcia added, “There is a good faith effort on all parties to do more cuts. We had to have compromise.”
The services tax compares to the $2 billion figure that Granholm had proposed in February.
Being a House bill, members of the House went into caucus nearing noon, Sunday, and a call of the House was ordered when lawmakers emerged.
Soon after, HB 5198, the service tax conference committee report, was put on the board. After 15 minutes of keeping the vote board open, Democrats first attempt at a service tax failed on a 52-57 vote, but the board was cleared before any official tally was taken.
All of the Republican caucus had been joined in dissention on the vote by Rep. Robert Dean (D-Grand Rapids), Rep. Marc Corriveau (D-Northville), Rep. Kate Ebli (D-Monroe), Rep. Terry Brown (D-Pigeon), Rep. Martin Griffin (D-Jackson) and Rep. Mike Simpson (D-Liberty Twp.).
The House then switched gears and attempted voting on SB 418 .
When the first vote on that measure was abandoned, Democrats returned to voting on the service tax measure and got it to pass on a 56-53-1 vote. After months of saying they didn’t want to fall on the sword by sending a tax hike to the Senate on a party-line vote, Democrats were the only ones to vote for the bill. Corriveau and Ebli still dissented from voting along with Republicans.
It was hours later before the Senate took its vote on the bill and it passed with no debate. Sen. Glenn Anderson (D-Westland) was the only Democrat to vote no. Sen. Valde Garcia (R-Howell) and Sen. Ron Jelinek (R-Three Oaks) voted yes for the bill before Cherry cast the deciding vote.
Then the Senate attempted an immediate effect vote. Normally the process takes no more than a minute, but quickly it became apparent this was more problematic.
Attention focused on Anderson, the only Democrat voting against immediate effect.
After a few minutes Senate Minority Leader Mark Schauer (D-Battle Creek), Garcia, Jelinek and Sen. Michael Switalski (D-Roseville) sat with Anderson trying to convince him to vote yes. Clearly, Anderson intended his vote to be tied to a Republican switching from no to yes.
After perhaps 10 minutes a frustrated Anderson left the floor.
Shortly after that, Granholm came onto the floor and went into the caucus room where Anderson was. After some 10 minutes she came out and began talking to individual members of the Senate.
These conversations lasted some time as members milled about on the floor and the galleries became packed with onlookers. After Granholm went up on the podium to talk to Cherry she came down and searched out Sen. Roger Kahn (R-Saginaw Twp.) He fished a sheet of paper from his suit coat and showed it to Ms. Granholm, though there did not seem to be any agreement acknowledged.
The board was cleared after some 45 minutes and the Senate finished action on other bills before returning to an attempted immediate effect vote on HB 5198.
After nearly 20 minutes, Anderson went green – yes – on his vote which led to the required 26 yes votes. There was some applause, but almost instantly Anderson and several Republicans voted no. One person on the GOP side of the Senate hissed “Weasel.”
Several Republicans now asked Anderson who he needed to see vote yes for him to vote yes.
At that point, Sen. Randy Richardville (R-Frenchtown Twp.) took the chair and ordered all staff from the floor. In the process a news photographer began shooting the voting board – Senate rules forbid photographing a non-roll call vote – and several senators shouted the photographer should be thrown off and one demanded his tape be confiscated. A sergeant stood with the photographer while that portion of the tape was erased.
Kahn then went to his desk and made a phone call. After several minutes, he voted yes on immediate effect and so did Anderson.
Kahn said he had discussed issues he worried about in Saginaw and Gratiot counties with Granholm and she acknowledged she understood his worries.
He also said as a vulnerable Republican Democrats wanted some parity in the vote, as Anderson is considered a vulnerable Democrat.
Anderson later said that had been his goal as well to ensure parity.
? Business service centers
? Carpet and upholstery cleaning
? Consulting services
? Courier and messengers
? Document preparation
? Investigation, guard and armored cars
? Investment advice (but not accounting)
? Janitorial
? Landscaping (but not lawn mowing)
? Office administration
? Packaging and labeling
? Personal care (but not hair care)
? Scenic transportation
? Security systems
? Service contracts
? Skiing (but not golf)
? Specialized Design
? Tour operators
? Transit and ground passenger transport
? Travel and reservations
? Warehousing and storage
? Mini-warehouse and self-storage units
? Personal services, which include:
? Astrology, fortune-telling, numerology, palm reading, psychic and phrenology
? Baby shoe bronzing
? Bail bonding
? Balloon-o-grams and singing telegrams
? Bondsperson
? Check rooms
? Coin operated blood pressure machines, personal machines, rental loc
