The Republican-controlled Michigan House early Thursday failed to approve an income tax cut, rejecting the plan after a lengthy session and the unsuccessful cajoling of some resistant members of the majority.
The legislation would lower the 4.25 percent tax to 4.05 percent by 2019 and then to 3.9 percent by 2021 as long as the state savings, or rainy day, fund is not below $1 billion. It has $734 million now but could grow to more than $1 billion in the next fiscal year.
The 52-55 vote at 1:45 a.m. — three short of the minimum number needed to move the bill to the GOP-led Senate — came after the measure again underwent revisions. Republican Gov. Rick Snyder had voiced concerns about the budget implications of a tax cut.
“It’s unfortunate. We wanted to produce legislation that was going to bring income tax relief to the hard-working taxpayers of this state,” House Speaker Tom Leonard told reporters after the measure’s surprise defeat.
As passed by a House committee last week, the bill would have cut the tax to 3.9 percent next year and phased it out completely by 2057. But GOP leaders could not muster support in the full chamber and on Tuesday amended the bill to reduce the tax to 3.9 percent over four years and to end the bid for full elimination.
Republicans changed the legislation some more early Thursday before the vote, which capped a 12-hour late-night session that was rare so early in a new two-year term. With all but one Democrat opposed, Leonard spent hours trying to coax hold-out GOP members.
But 12 in the 63-member caucus voted no. Leonard said he called for the vote knowing it would likely fail — an unusual move as opposed to instead clearing the voting board once support was lacking — because “I had an overwhelmingly majority of my caucus that wanted to let the world where they stood in terms of defending taxpayers in this state.”
The bill could be revived later, though Leonard said the House would next work on Snyder’s budget proposal in coming months and tackle other big agenda items.
Snyder had expressed “serious concerns” with earlier versions of the income tax proposal, pointing to tax cuts already enacted under his watch and to approaching budget pressures such as increased road spending.
The nonpartisan House Fiscal Agency estimates revenue in the $10.5 billion general fund would fall by $195 million in the next budget under the legislation, growing to a $1.1 billion reduction in the 2021-22 fiscal year if fully implemented. In 2021, a person with $50,000 in annual taxable income could pay $175 less than today if the measure is signed into law.
Republicans said workers should keep more of their paycheck and billed the tax cut as a way to fulfill a “promise” made in 2007, when the then-3.9 percent tax was raised to 4.35 percent to balance the budget. The tax was scheduled to gradually drop back to 3.9 percent by 2015.
That never happened because Snyder and the GOP-led Legislature in 2011 froze the rate at 4.25 percent while slashing the main business tax, taxing retirement income and making other tax changes.
“We have a responsibility in government to fulfill our promises. Where I’m from, when you make a promise you keep your word,” said Rep. Thomas Albert, a Lowell Republican.
Democrats criticized the cut as disproportionately benefiting the wealthy and said it should be targeted to the middle class. They also warned of reduced funding for universities, local communities that need state aid for police and firefighters, and the social safety net for low-income residents.
“House Democrats, we have been fighting for a long time to give these working families tax relief. But the problem Mr. Speaker that I have with your solution … is that the biggest winners are Michigan’s wealthiest residents,” said Rep. Jeremy Moss, a Southfield Democrat.
Democratic Rep. Brian Elder of Bay City said his average constituent would get a tax cut equaling a “paltry $3 a week.”
Rep. Scott Dianda of Calumet was the lone Democrat to join 51 Republicans in voting yes. Republicans opposing the bill were Reps. Chris Afendoulis of Grand Rapids Township, Julie Calley of Portland, Kathy Crawford of Novi, Daniela Garcia of Holland, Larry Inman of Williamsburg, Jim Lilly of Park Township, David Maturen of Vicksburg, Michael McCready of Bloomfield Hills, Dave Pagel of Berrien Springs, Brett Roberts of Eaton Township, Jason Sheppard of Temperance and Scott VanSingel of Grant.
Fallout from the vote was already underway.
Sheppard, who chairs the House Financial Services Committee, was removed from the panel by Leonard — who accused Sheppard of lying to him and telling him he would vote yes. Sheppard could not immediately be reached for comment.