Michigan residents will get an income tax cut worth $25 per person within a few years and an estimated 348,000 drivers who owe extra fees for certain traffic infractions will have their debt forgiven this year under legislation overwhelmingly approved by the Legislature on Wednesday.
Republican Gov. Rick Snyder, who will sign the bills, agreed to the deal with GOP legislative leaders hours before the votes were held.
The measures also clarify that Michigan's personal tax exemption continues, after concerns were raised that the recent federal tax cuts could eliminate it due to how the state code is linked to the U.S. code.
"The money collected through taxes belongs to the people of Michigan, not to politicians and not to the government," Republican Rep. Jeff Noble of Northville said during the House debate.
The main bill gradually raises the personal exemption until it gets to $4,900 in the 2021 tax year — $600 higher than what it is scheduled to reach currently. That is a $25.50 tax cut per individual, or $102 for a family of four. In 2022 and after, there will be annual inflationary increases to the exemption.
The legislation won bipartisan approval on 107-2 and 36-0 votes. It will save taxpayers about $400 million combined in the next three fiscal years, including roughly $175 million in the 2020-21 budget year.
Senate Majority Leader Arlan Meekhof, a West Olive Republican, said the agreement will make the budget process "very tight" but added that "we'll fund our priorities." Snyder, who outlined his final spending plan last week and had been concerned about the budgetary impact of new tax relief combined with tax cuts already on the books for coming years, said the compromise is fiscally responsible and broad-based.
The Legislature also unanimously passed legislation to wipe clear all outstanding driver "responsibility" fees — which totaled $637 million last summer — starting in late September. Newly assessed fees will end then, too, a year earlier than scheduled.
The fees were enacted by former Gov. Jennifer Granholm and legislators in 2003. They are imposed in addition to regular fines and have come under criticism as a budget-balancing "money grab" that disproportionately hurt low-income motorists who cannot afford to pay, perpetuating a cycle of poverty. Historically, only 55 percent of the debt has been paid.
The state suspends the driver's license of those who do not fully pay the fees or who do not have an installment plan. Under an amendment adopted Wednesday, the $125 fee to reinstate the license will be waived for this year.
The responsibility fees now range from $100 to $2,000 for offenses such as driving without insurance and accumulating too many points from traffic infractions. About 31,000 of the 348,000 motorists with unpaid fees no longer live in Michigan.
House Speaker Tom Leonard, a DeWitt Republican who has made the debt forgiveness a top priority, said the fees are "unjust" and clearing people's debt is "the right thing to do. I'm glad we're getting them their driver's licenses back." Sen. Coleman Young II, a Detroit Democrat, said the fees have made it tougher for the city's residents to buy groceries and pay other bills.
Rep. David LaGrand, a Grand Rapids Democrat, said the Legislature should next move to eliminate court fines and costs that are leading low-income people to be incarcerated because of an inability to pay.
"We have more work to do," he said.
While all but two legislators voted for the tax cut, at least one outside organization was critical of the decision and called it a "political ploy."
"Simply put, the juice is not worth the squeeze on a tax cut right now," said Gilda Jacobs, president and CEO of the Michigan League for Public Policy, which advocates for the poor and for spending on public assistance and government programs. "Lawmakers are making bad decisions today that will force future legislators to pay for them with significant cuts to the services residents value and rely on."
State budget office spokesman Kurt Weiss, citing conservative budget practices, said the budget plan can be adjusted to incorporate the agreement "without affecting the governor's key priorities in education, infrastructure and public safety. We will be going through the rest of the recommendation to make the necessary adjustments to ensure we are in balance for the long term."
