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Mich. may raise income tax

September 13, 2007

In an effort to avoid a state government shutdown, Michigan’s House of Representatives could raise the state’s income tax by as much as .07 percent to improve Michigan’s budget woes.

Michigan’s current income tax is 3.9 percent. The proposal would raise it to either 4.4 percent or 4.6 percent, The Associated Press reported.

“The speaker has said we are going to stay in session until we solve the fiscal crisis,” said Greg Bird, spokesman for House Majority Leader Andy Dillon, D-Redford.

House Democrats were interested in presenting a potential sales tax increase to voters, however, House Republicans voted down the measure in Wednesday’s session.

“What we did was put through a proposal that was originally pushed by Senate Majority Leader Mike Bishop to increase sales tax from 6 percent to 7 percent,” Bird said. “We would put that on the ballot for the voters to decide. The House Democrats thought we could get bipartisan support … and no Republican voted for it.”

In order to put an initiative on the ballot, a 2/3 majority of the Legislature is required.

“We were against (the sales tax increase) because we missed the deadline (for the November ballot),” said Phyllis Washburn, spokeswoman for House minority leader Craig DeRoche, R-Novi. “It wouldn’t be before the people for a vote until January. If there is a government shutdown it will be Oct. 1 and we need a solution now, not halfway down the road.”

Without a budget in place for the next fiscal year, the state could face a government shutdown because funds would not be available for state workers, programs and services.

The Legislature has until Sept. 27 to finalize any budget decisions in order to make its first payments on Oct. 1, the first day of the new fiscal year.

“It puts them in a situation where if nothing is done they violate the (state) constitution,” said Mitchell Bean, director of the House Fiscal Agency.

“But their options are either don’t run anything, which is not an option, or the Legislature is forcing them to spend some money anyway and violate state constitution.”

If there is a violation of the constitution, it isn’t specified what the implications would be, if there would be any at all, Bean said.

“If there is no budget in place on Oct. 1, the state has no ability to pay employees, pay for any contracts, etc.,” Bean said in his memo to the House Appropriations Committee.

However, coming to a compromise on a proposed income tax increase also might be difficult for the Legislature because of opposing ideas within the House.

“Rep. DeRoche is against it. It’s called a budget for a reason,” Washburn said. “We have so many programs we’re spending on, and it’s an overspending problem, not a revenue problem. We would like to see reform in the state government.”

With 13 days until the Sept. 27 deadline, many members of the House feel confident that a resolution will be met for both parties and chambers.

“We’re hopeful a compromise will be made,” Washburn said. “A government shutdown will not do anything for our economy, and the people of Michigan are at risk.”

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