A news service for the people of Michigan from the Mackinac Center for Public Policy

Editor’s note: The following is a public statement from the Michigan League for Human Services. It was released on Oct. 1, 2007, in response to the budget and tax agreement between Michigan lawmakers and the governor that had been reached earlier that day (see front-page articles). The MLHS describes itself as "a statewide citizens non-profit organization dedicated to education, research and advocacy for the benefit of low income and other vulnerable citizens in the state of Michigan." The MLHS Web site can be viewed at www.milhs.org, and this release can be viewed at www.milhs.org/Media/EDocs/MLHS STATEMENTONBUDGETDEAL.pdf.

"Today, Michigan lawmakers and the governor averted a disastrous, cuts-only solution to the deficit in the fiscal year that began just after midnight.

"There will still be cuts. Between $200 million and $400 million still must be axed from this year’s budget. Important programs such as day-care subsidies for low-income parents will likely be on the table again for cuts.

"And, an increase in the income tax will hurt lower income wage-earners. The flat income tax rate is one of the most regressive income tax structures in the country, taxing wage-earners at lower levels of income than most other states.

"But the pain from today’s budget deal will be far less than under other scenarios.

"By passing tax increases — votes that for some come at great political risk — policymakers finally begin to address a structural deficit where normal growth in the cost of state services surpasses revenue each year.

"Since 2001, the state has dealt with the structural deficit though [sic] borrowing and using gimmicks and one-time resources to patch the holes. The package finalized today is a step in the right direction.

"It would:

  • "Raise the income tax from 3.9 percent to 4.35 percent until 2011, when it would start coming down again by one-tenth of a percent per year. Unfortunately, attempts failed to allow a reduction in the income tax only if there were sufficient funds in the state rainy day fund.

  • "Extend the sales tax to a variety of services, including management consulting services, landscaping, shoe shines and salon services other than hair cuts.

"The combined new tax revenue in 2008 will be nearly $1.4 billion, compared with a $1.8 billion deficit. Next year, the increases will pull in an estimated $1.5 billion.

"The League applauds the lawmakers who cast courageous votes, Gov. Jennifer Granholm for supporting higher taxes and those citizens who took the time to express their support of a budget that keeps vital services and protects vulnerable citizens."

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