News Story

Granholm: Income Tax Would Be Lower If GOP Left It Alone

Republicans repealed scheduled reductions in former Democratic governor’s 2007 tax hike

In fall 2007, the Democratic-controlled state House and Republican-controlled Michigan Senate approved an income tax hike sought by then-Gov. Jennifer Granholm, a Democrat. The measure, labeled as temporary at the time, raised the state tax rate from 3.9 percent to 4.35 percent. It also included a schedule of future reductions that would have rolled the increase back by the end of 2015.

Granholm recently tweeted the following:

“Facts: I signed a bill during the fiscal crisis that raised personal income taxes temporarily. That bill required taxes to be fully reduced back to 3.9% by 2015. In 2011, after my terms, GOP stopped that rollback; but for that action, Michiganders would be paying 3.9% today.”

The former Democratic governor is correct, and the rate has barely changed since it was increased under her watch. The single 0.1 percentage point reduction that has occurred was part of Gov. Rick Snyder’s overhaul of the state business tax in 2011. That legislation repealed the scheduled income tax rollback.

That was the situation in February 2017, when a new Republican Speaker of the House called for a vote on cutting the rate by two-tenths of a percent, to 4.05 percent. The income tax cut was defeated when 12 Republicans joined all 43 Democrats who were present to vote “no.” No further action has occurred.

Granholm’s recent tweet did not mention three Republican bills introduced between 2008 and 2010 to repeal the rate hike altogether or accelerate its scheduled reduction; none of them received a hearing in the House, which was then controlled by Democrats. The first of these bills was introduced in 2008 by Republican Sen. Phil Pavlov, then a member of House minority, and would have immediately returned the rate to the pre-tax hike of 3.9 percent.

Michigan Capitol Confidential asked Pavlov why the lawmakers have failed to roll the rate back despite a strong economy and a GOP trifecta that’s been in place since 2011:

“It’s been difficult because government has become accustomed to the revenue,” he said.

Pavlov pointed to special interests, including those focused on the 2013 Obamacare Medicaid expansion, and a steady increase in funding for public schools. His explanation for the initial 2007 vote to increase rates was that “the tax eaters were more powerful than the taxpayers in that case.”

Pavlov acknowledged Granholm’s support for the scheduled rate rollback in 2007 and in the recent tweet, but he added that the former governor likely understood how difficult a rollback would be for legislators.

“There was no illusion there,” said Pavlov. “The crisis is long gone. It’s still nearly impossible to repeal that income tax hike.”

“It’s a disappointment,” said Pavlov, referring to the inability of the current Republican governor and Legislature to lower the state income tax rate. He said he is committed to returning “dollars back into the pockets of hardworking taxpayers.”

He continued, “Hopefully, in lame duck, we have an opportunity to do the right thing,” presumably referring to the income tax cut defeated at the start of 2017, or a similar bill.

A representative for Granholm said she would not be available for comment on this story due to scheduling conflicts.