LANSING – While changes to legislation providing tax exemptions for date centers – like Nevada-based Switch, that would like to come to the state if the tax changes are passed – weren’t expected by the committee chair, Michigan House Speaker Kevin Cotter said after a lengthy caucus on the subject, the bills could see some alterations before action on the House floor.
When HB 5074, HB 5075 and HB 5076 cleared committee this week, House Tax Policy Chair Rep. Jeff Farrington (R-Utica) said he did not expect significant changes and the House would move swiftly on the bills.
But Cotter (R-Mount Pleasant), in an interview with Gongwer News Service Friday, said after a caucus discussion on the legislation Thursday, members will spend the weekend thinking about the bills. Cotter said he could not guarantee the bills would move nor did he know what kind of changes would be made.
“I really can’t say at this point,” he said. “One thing I wanted to do over the weekend is spend some time with the Senate version (SB 616, SB 617 and SB 618). … While it is time-sensitive, with something like this, I think what trumps the time-sensitive nature is that we get it right. So I want to take as much time as it takes to get it right.”
Cotter said one issue is how much tax revenue loss would hit the General Fund. The bills would make data centers exempt from sales, use and personal property taxes. While there are a handful of data centers in the state currently, the legislation is coming at the request of Switch, a company looking to settle its east coast hub in the Grand Rapids area.
Switch would be much larger than the existing data centers and it is unclear what kind of revenue they would bring in through other taxes, including employee income taxes.
A Senate Fiscal Agency analysis, which takes into account Switch moving to Michigan, says the loss in potential new revenue would be $225 million. But a House Fiscal Agency analysis, which looks at only current data centers in the state, says the loss of revenue existing would be between $20 million and $30 million.
But Cotter said neither of those takes into account other revenues Switch would bring.
“If tax revenue that is flowing through the state currently were to be stopped, that is part of the analysis. But then also, what are the increases going to be that are realized?” he said. “If the deal was done and it was broad-based and Switch was to come to Michigan, then what other revenues would we see?
“What we would like to see is that would be an overall net benefit, and we would need to show that before we get support moving forward,” he said.
Cotter said while the state has moved away from targeted tax credits, this is a change in the tax code for the entire industry. And, he said, it is a unique opportunity for the state.
He said Switch was actually never looking to come to Michigan and was pretty far along in the process of making arrangements with New York.
Cotter said Michigan is unlike 20 or so other states that have these exemptions for data centers, and officials from Switch said if the state considered making those changes, they would gladly set up shop here.
“So we said we need to look at this, because it’s not targeted tax credits but rather a change in tax policy,” he said. “That is something that really got the conversation started. And now we are just kind of working through all of those issues. We want to be thoughtful about this. We want to be sure we are treating people fairly.”
The Michigan Chamber of Commerce and others are opposed to the tax changes as unfair to current businesses in the state, but Mr. Cotter said they are working to be fair.
“We want to be loyal to our partners and that is what we are working on right now,” he said. “Are there things we can do to this bill to make it fair for everyone?”
ABSENTEE, STRAIGHT-TICKET ELIMINATION: Cotter said he likes legislation (HB 4724) sponsored by Rep. Lisa Posthumus Lyons (R-Alto) that would create “secure no-reason” absentee voting.
The bill would require those wishing to vote absentee for a reason that is not currently permitted to come to their clerk’s office and show ID to get a ballot. However, leaders in the Senate have not appeared open to the idea.
“We want to encourage people to vote but at the same time, and maybe more importantly, certainly more importantly, make sure the process is protected,” Cotter said. “I think that is what Rep. Lyons’ bill does. We will spend some more time on next week and that is something we could see some movement on.”
Lyons has said she may tie-bar the bill to SB 13, which would eliminate straight-ticket voting.
Cotter said he doesn’t believe the two bills have to move together, but if they are both ready and have support, they likely will. He said he believes SB 13 has broad support in the caucus but is unsure of the support on no-reason absentee voting.
The Senate bill also has a $1 million appropriation, which has received criticism from advocates who say it is designed to make the bill referendum-proof. But Cotter said appropriations in legislation are not used often in the Legislature and only when it makes sense.
And in the case of SB 13, it does make sense to help deal with the increased lines clerks say they will see in result of the bill, he said.
“We look at the issue of eliminating straight ticket voting (and) the primary issue we heard voiced by the clerks in particular is … it would result in longer voting lines,” he said. “Which, I don’t know if I buy into that completely. But I think that is just one example where an appropriation could make good sense, to alleviate that concern from clerks to help the process move along quicker.”
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