Received a constituent email today asking about Proposal 1 on the August primary ballot. I’m sharing my response for the many who are also confused or looking for direction on this curiously-worded proposal.
Q: Do you support Prop 1?
A: The short answer to your question is yes, though reluctantly.
The ballot initiative codifies a replacement for the Personal Property Tax (PPT) which was previously eliminated by the Legislature a few years back but with no replacement for the roughly $500 million per year that went mainly to funding local units of government ans schools. The PPT is accurately characterized as a disincentivefor investment in Michigan and getting rid of it is good for business and hopefully will free up resources to prompt job creation. The ballot proposal would set in place revenue streams to keep local units of government “whole,” avoiding cuts that would have been devastating.
That said, under Gov. Rick Snyder business has already received a $1.8 billion tax cut as well as many other considerations, yet the state has not seen the job growth promised. Also, as the ballot proposal does not create a “money tree,” the revenue to protect local governments has to come from somewhere. This impact to the state’s General Fund is being downplayed by proponents but according to the non-partisan Citizen’s Research Council of Michigan, “The tax shift will have significant fiscal implications for the state’s General Fund . . . revenues will be $107 million lower in FY2016 and $349 million lower in FY2017 as more and more state revenue is shifted to the new local tax. By FY2025, the GF/GP revenue loss is expected to reach $500 million.”
What will be the effect? The General Fund in FY 2013 was $9.2 billion of which 88% goes toward funding human services and 12% to state departments. Specifically, human services includes $1.96 billion for Corrections (the state prison system), $2.7 billion for Community Health programs, and $1.2 billion for Higher Education and Community Colleges, to name just a few of thee big ones. So, absent any changes or enhancements, all of these will see about a 5% cut within three years to pay for this tax cut.
Defeating this ballot initiative wouldn’t change the fact that Lansing has already repealed the PPT. (NOTE: I received a correction from a knowledgeable source indicating that if the ballot measure goes down, the old PPT provisions would stand.) This revenue replacement scheme is likely to be the best deal offered [from a regime bent on cutting business taxes at whatever cost], though when the cuts come and services are impacted in the form of prison overcrowding, higher tuition for students, and reduced services for elderly, poor, and disabled, most will have no doubt forgotten about the trade off we’re making in August 2014.
Lastly, the partisan in me is standing with my team. Mark Schauer, my candiate for Michigan Governor, has endorsed this proposal as well. If it’s good enough for the next Governor of Michigan . . .
I welcome your thoughts as well. In the meantime, know that I appreciate hearing from you and hope you’ll call on me if I can ever be of service.