The day after the Michigan Senate passed a $1.8 billion corporate welfare bill, the Michigan House voted against cutting the state income tax — by less than one-half percent.
Republicans control the Michigan House and Senate by wide margins and have the governorship, but when given the opportunity to help individuals or wealthy corporations, they chose the latter.
Governor Rick Snyder opposed the income tax cut and urged lawmakers to vote against it. He claimed tax cuts were too quick, which he said could cause shortfalls in the state budget. But these excuses, which Snyder and other Republican lawmakers presented, should not console fiscal conservatives.
Under the bill which failed in the House, the state income tax would have dropped a meager 0.1 percent in 2018, from its current rate of 4.25 percent to 4.15 percent. Through 2021, it would have fallen to 3.9 percent. This small cut prompted Representative Dave Pagel to call the measure “fiscally irresponsible.”
Pagel belonged to a group of 12 Republicans who helped defeat the tax cut.
The plan would have saved taxpayers $1.1 billion per year, but Snyder said this was a burden the state could not bear. And Republicans claimed Michigan couldn’t lose this revenue without cutting essential services.
But Michigan survived before with lower taxes. The income tax was 3.9 percent until 2007, and it did not exist at all before 1967.
Despite such principled budgetary concerns from Michigan Republicans, they still find millions of dollars to give to corporations every year.
The Senate’s latest corporate welfare legislation would give $1.8 billion to businesses over the next 20 years. It passed with the votes of 20 out of 27 Republican Senators and the support of State Senator Mike Shirkey, who represents Hillsdale.
The bill still has to pass the house and receive Snyder’s approval. But even if this bill is defeated in the House, it is only one of many corporate welfare programs that Michigan still has, such as the Michigan Economic Development Corporation, which redistributes nearly $200 million from taxpayers to big businesses each year.
The problem with these programs — besides that they unfairly treat taxpayers and misuse the state budget — is that they allow political power to influence business decisions.
In Hillsdale, for example, the Commercial Rehabilitation Act gave tax breaks to the owners of the Hillsdale Market House but not to Handmade when they opened their business. This is because politicians get to decide who receives the tax breaks and who does not — and Handmade did not lie in the right place to receive the government’s assistance, according to Hillsdale Assessor Kimberly Thomas.
But these corporate subsidies don’t just pick winners and losers—they hurt communities. Broad Street Market, which had received tax breaks, went out of business, leaving the city with another empty building and many people out of a job. Taxpayers were on the hook to build up the business, but they didn’t get any money back when it went out of business.
Most Republicans campaigned on tax cuts and fiscal conservatism, but have only delivered tax hikes and subsidies for businesses.
Michigan Republicans should show that they can govern like fiscal conservatives by eliminating the state’s corporate welfare programs and using the money saved to give citizens a tax break.