LANSING – Michigan House Republicans on Wednesday found the votes, mostly within their own caucus, to pass a $1.2 billion road funding plan with no guarantees of support from Senate Majority Leader Arlan Meekhof or Governor Rick Snyder.
The plan involved $600 million in new revenue through a gas tax increase and registration fee increases and $600 million from existing sources. An income tax rollback and an expansion of the Homestead Property Tax credit are also included.
The plan would include a 3.3-cent increase effective in 2018 in the overall fuel tax, as well as an additional 4 cents for diesel to bring it up to the gas tax level effective in 2017.
The plan would increase registration fees by $400 million total, averaging $55 additional per vehicle for both passenger and commercial vehicles ($40 for passenger vehicles).
To offset the tax increases, the plan would increase the amount of homestead property tax credit available by both increasing the amount of income affected, to 3.5 percent from 3.4 percent, and increasing the income cap to $60,000, with the phase-out of the credit starting at $51,000. That is a $10,000 increase from the current caps.
The phase-in of the plan would provide $400 million for fiscal year 2016-17 and increase to $1.2 billion by FY 2020-21. Part of the increase is General Fund, which would increase from $150 million in FY 2018-19 to $600 million the final year.
The tax credit offset would start with $40 million in FY 2017-18 and increase to $200 million in FY 2020-21.
The plan also includes a proposed income tax roll-back beginning in 2019 if general fund revenue outpaces inflation.
Business groups were also split in their reception of the plan with some seeing it as a breakthrough and others as fiscally irresponsible.
“I think that this is a very good plan,” House Speaker Kevin Cotter (R-Mount Pleasant) said after the bills passed. “We are going to be working with our partners. This is a huge step forward. I think this is a good grand compromise plan.”
But House Democrats tore the plan apart as irresponsible and said the only reason the House Republicans wanted to vote on a plan this week is because Meekhof (R-West Olive) “challenged” Cotter to take a vote on a plan the quadrant leaders had been discussing.
“Let’s just set the record straight here for everyone,” said Rep. Marilyn Lane (D-Fraser), the minority vice chair of the House Transportation and Infrastructure Committee. “This is a knee-jerk reaction plan simply to match egos with our counterparts in the Senate.”
Those talks fell apart last week, with House Minority Leader Tim Greimel (D-Auburn Hills) concerned about an income tax rollback.
Meekhof called for Cotter to hold a vote on the plan anyway. Cotter refused. At that point, as Gongwer News Service first reported Tuesday, Cotter began attempting to put together support for a 600/600 plan that could pass with Republican support only. About 9 p.m. Wednesday, he did. It was seen as a retort both to Meekhof and Greimel.
“This plan is an embarrassment to the Legislature and it has managed to combine most of the worst aspects of the terrible plans we have seen over the course of the last year,” Greimel said.
Democrats criticized the income tax rollback for not having a floor and said it could severely strain the General Fund.
“It’s a fiscal time bomb,” said Rep. Jim Townsend (D-Royal Oak).”And I don’t know if anybody on this floor knows just how explosive it could be.”
But Cotter said the income tax rollback was a crucial feature of the final plan in terms of getting votes. SB 414, the income tax rollback bill, is not tie-barred to the other bills in the package.
The bills passed with varying support, with 54 votes needed for passage, some bills passed narrowly: The gasoline tax increase passed 56-50 (HB 4614, HB 4616 and HB 4738); HB 4736 boosting vehicle registration fees passed 55-51; The competitive bidding bills (HB 4610 and HB 4611) and the expansion of the Homestead Property Tax Credit (HB 4370) passed 62-44; the income tax rollback passed 61-45 and HB 4737 concerning warranties passed 101-5.
Rep. Harvey Santana (D-Detroit) was the only Democrat to vote for many of the bills other than the legislation regarding warranties.
Rep. Jeff Farrington (R-Utica) said the plan would “literally” pave our roads.
Now the question is what the Senate and Snyder will do. The speculation was rife Wednesday night that Snyder could relent on his concerns about the impact to the General Fund.
“Forward progress is a good thing, though (the) governor does have some concerns,” Snyder press secretary Sara Wurfel said, saying any solution must be “fiscally responsible.”
Said Meekhof in a statement: “I am happy the House sent over an idea for the Senate to consider. I look forward to talking with the governor and legislative leaders about the proposal. I have not had an opportunity to review the legislation, yet. The next step is for my fellow caucus members and I to review the details.”
