February 2007 Field Report -
Southeast Michigan
By: Tony Daunt – Southeast Michigan Field Director
A Taxing Time in Lansing
I’m sure everyone reading this article has seen the famous World War II era poster with the austere Uncle Sam asking young men to join the United States Military. If we were to design a similar poster for Michigan right now, it would likely feature Governor Granholm sternly pointing and saying, “I Want YOU To Pay More Taxes On Your Commissions.” Now, some of you may think that’s an awfully tough rhetorical jab at the governor but circumstances dictate a tough stance by the Michigan Association of REALTORS® towards her most recent budget proposal.
As I mentioned in my report last month, revenue enhancements (which are called tax increases by people outside of government) were considered to be the Governor’s favored solution to balancing the state budget. Speculation was especially focused on the possibility that the Granholm administration was looking to expand the sales tax to include more than 100 services – including your commissions – that are currently not taxed. Unfortunately, that speculation gave way to reality on February 8th when Bob Emerson and Bob Kleine, the administration’s Budget Director and Treasury Director, respectively, made their presentation to the joint House and Senate Appropriations Committees. This was not an unexpected announcement because the Governor and her people had been laying the groundwork for raising your taxes for several weeks prior to their budget presentation. However, it was still a little surprising that her proposed solution would rely almost exclusively on tax increases and accounting gimmicks to address what even she has admitted is a profound, structural problem with the way Michigan funds its government. To put her misguided priorities into perspective, here are just a few examples that have been deconstructed by the nonpartisan Senate Fiscal Agency:
- Projected Fiscal Year 2007 (10/1/06 to 9/30/07) deficit = $942.4 million
- Amount addressed through tax increases = $525.4 million (54.9%)
- Amount addressed through accounting gimmicks = $387.4 million (40.6%)
- Amount addressed through funding reductions = $43 million (4.5%)
- Proposed Fiscal Year 2008 (10/1/07 to 9/30/08) budget = $43.9 billion
- General Fund portion of FY’08 budget = $9.6 billion (3.5% more than FY’07)
- School Aid Fund portion of FY’08 budget = $13.4 billion (2.6% more than FY’07)
- New government programs in Granholm’s FY’08 budget = 17
- Cost of these new programs to taxpayers in FY’08 budget = $1 billion
If we are to believe, as most do, that there is a structural problem with the way Michigan collects and spends your tax dollars, it is absurd to think that closing the current deficit with one-time fixes and tax increases will do anything to address this long-term fiscal crisis. And I would hazard a guess that all of you find it beyond absurd and well into offensive that anyone, from the governor’s office to the 148 members of the state legislature, would ask you to pay an additional two percent tax on your commissions to fix a “structural” problem and in the same breath propose 17 new programs at a cost of $1 billion.
Thankfully, the Michigan Association of REALTORS® is a top player in Lansing and has established solid relationships with legislative leaders from both parties in the House and Senate. This access, thanks in large part to the work of your RPAC Trustees, has allowed us to make your discontent crystal clear. As a result, the legislature has thrown the brakes on Governor Granholm’s tax train and your staff in Lansing, including me, will continue to meet with legislators to discuss alternatives. While this is a positive development, we should not rest. Please continue to read your MAR publications and email announcements and be ready to respond to any Call to Action that is required.
The “Pop-up” Tax
Another important tax issue being discussed in Lansing is how best to deal with the property tax inequities that have arisen since the passage of Proposal A. This is a complex issue and I must stress that any solution, especially one that addresses the problem with a long-term strategy, will be subject to intense debate and months of negotiations. That being said, the House Commerce Committee took testimony on the topic several weeks ago and the Michigan Association of REALTORS® was represented by Brad Ward, Director of Public Policy and Legal Affairs, and Mike LeVan, a member of the Grosse Pointe Board of REALTORS® who sits on the MAR Public Policy Committee. The Grosse Pointe area is one of several areas in Southeastern Michigan that have seen added difficulties in their markets due to the affects of the “pop-up” tax.
House Speaker Andy Dillon has made repeated comments in public and in private that he believes this is a significant disincentive for homebuyers and sellers, especially as it pertains to downsizing by the elderly in older, more established cities. They see little benefit in moving to a smaller home when they are likely to pay as much, if not more, in taxes for the same city services they were getting at the old home. This creates a whole host of other problems within the market and the community, not the least of which is the impact it has on the ability of younger families to move into the community and send their children to the local public schools.
Speaker Dillon has indicated that he will reintroduce legislation from last year that seeks to put an 18 month moratorium on the “pop-up” tax in exchange for an increase in the transfer tax from .75% to .85% during that period. Though it can be argued that there are numerous problems with a short-term solution like this, we are happy to continue working with the Speaker on this important issue. We are very lucky to have the knowledge of our Public Policy Committee members at our disposal and we will continue to rely on them as we move forward. This is a crucial time in Michigan’s history and the decisions that are made in Lansing will have a profound impact on the health of our fiscal and economic future.
As always, if you have any questions about this article or anything else pertaining to state government, please do not hesitate to contact me. I’m happy to be of assistance.
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February 2007
Field Report
• Field Report
Tony represents:
• Ann Arbor Area
• Dearborn
• Detroit
• CBOR
• Down River
• Grosse Pointe
• Lenawee County
• Livingston County
• MCAR
• Monroe County
• North Oakland County
• Western Wayne Oakland County
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