News Story

Michigan House Republicans Find $1 Billion More for Roads with No Big Tax Hike

Corporate welfare gets the ax while new revenue flows to transportation

After the defeat of Proposal 1, which would have imposed a $2 billion tax hike and increased non-road government spending by $600 million, House Speaker Kevin Cotter, R-Mt. Pleasant, promised to deliver a plan that increases road funding by re-prioritizing current spending and future state revenue growth.

House Republicans rolled out a plan on May 13 that would accomplish this, partly through spending cuts and partly by allocating increased revenue generated by the state's improving economy to road projects. The plan also increases road builder warranty requirements and would eliminate the state Earned Income Tax Credit, which complements a similar federal subsidy for low-income households. The additional resources for roadwork would increase gradually, going into full effect in 2019.

Some $185 million would be generated by spending less on corporate welfare. Republicans would stop appropriating $75 million annually to the "21st Century Jobs Fund" program created by Gov. Jennifer Granholm. Some $60 million in payments from Indian casinos would no longer flow into the "Michigan Strategic Fund" under which the state's various corporate subsidy programs are organized, and $50 million in annual subsidies to film producers would be terminated.

Launched in 2005, the 21st Century Jobs Fund has been a notable failure, repeatedly missing job creation promises and running into audit troubles. Under current arrangements, Indian casino payments to the state are not even appropriated by the Legislature but flow directly into the Strategic Fund's coffers, paying salaries there and at the Michigan Economic Development Corporation as well. Since 2008 the state has delivered around $500 million to film producers, while the number of full-time film jobs here has declined.

Another $117 million would come from eliminating state payments to low-income households through the Earned Income Tax Credit. This would not affect the federal EITC payments on which the state program is based. (Michigan taxpayers kick-in an extra 6 percent that is added on to the federal benefit.)

Increased revenue from current taxes generated by economic growth would contribute around $700 million to the plan. Michigan’s economy has been growing and state government revenue (not counting federal money) has increased almost $3.7 billion over the past four years.

House Republicans would dedicate further revenue growth to roads first before increasing other state spending.

To go into effect, the plan needs to pass the House and Senate and obtain the signature of Gov. Rick Snyder.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.