The Michigan House of Representatives late Wednesday voted down legislation to roll back the state's income tax 52-55 along mostly party lines.
"It's unfortunate. We wanted to produce legislation that was going to bring income tax relief to the hardworking taxpayers of this state," House Speaker Tom Leonard, R-DeWitt, told reporters after a 12-hour session that went from 1:30 p.m. Wednesday past 1:30 a.m. Thursday morning.
It's rare for a vote to go up and fail in the House. Leonard said he knew that result was likely in this case, but an overwhelming majority of his members wanted to make their voices heard in support of this.
What started as a proposal to incrementally eliminate the state's 4.25 percent income tax morphed into a proposal to gradually cut it to 3.9 percent over four years on Tuesday. On Thursday, the House amended the plan again.
In its latest form House Bill 4001 would continue to cut the tax rate to 4.15 percent in 2018 and 4.05 percent in 2019. If the state's Budget Stabilization Fund -- more commonly known as the "rainy day fund" -- was over $1 billion by 2020, the rate would rop to 3.95 percent. If that were still true in 2021, it would drop to 3.9 percent. There is currently $734 million in that fund.
The House Fiscal Agency estimates the rollback to 3.9 percent would result in incremental revenue loss to the state, reaching a $1.1 billion budget hole by Fiscal Year 2022, when it's fully phased in.
That was a concern to House Democrats, who voiced concern that the state may have to make cuts to essential services like police and fire through revenue sharing with local municipalities, or fixing the roads in the future.
Rep. Brian Elder, D-Bay City, voted against the measure because he said his constituents cared about those things.
"We have less money, we get less of those things. It's that simple," he said.
The bill needed a majority to pass, but went down 52-55.
A total of 11 Republicans crossed party lines to vote against the proposal. They were Reps. Chris Afendoulis, R-Grand Rapids Twp.; Julie Calley, R-Portland; Kathy Crawford, R-Novi; Larry Inman, R-Traverse City; Jim Lilly, R-Park Twp.; David Maturen, R-Vicksburg; Mike McCready, R-Bloomfield Hills; Scott VanSingel, R-Grant; Jason Sheppard, R-Temperance; Rep. Brett Roberts, R-Charlotte; Rep. Daniela Garcia, R-Holland; and Rep. Dave Pagel, R-Berrien Springs.
Only one Democrat, Rep. Scott Dianda, D-Calumet, crossed over to vote for the tax cuts with most Republicans.
House Democratic Leader Sam Singh said his members largely voted against the bill because they're interested in giving tax cuts to those in the middle class, who actually need the resources.
"What they're hearing from their constituents is 'fix the roads, fix the roads.' And this plan actually takes money away from the roads... they didn't want to see that. They want to see a targeted tax cut that actually goes to working families," Singh said.
Proponents of the tax cut, including Leonard and Sponsor Rep. Lee Chatfield, R-Levering, have framed the proposal as a way to keep a Gov. Jennifer Granholm-era promise to bring the income tax back down to 3.9 percent.
In 2007 as part of a move to balance the budget, lawmakers raised the income tax from 3.9 to 4.35 percent. The plan then was to keep it at 4.35 percent for four years and then slide it back to 3.9 percent over six years, according to a history of the income tax from the Senate Fiscal Agency.
But in 2011, Republican Gov. Rick Snyder led an overhaul of the state's tax system. The laws passed at that time fixed the state's personal income tax at 4.25 percent instead of decreasing it to 3.9 percent.
Rep. Tom Albert, R-Lowell, said he knows firsthand what it's like to struggle financially. He said his wife called him from the grocery store during a tough period, crying because they'd cut everything they could and still couldn't afford groceries.
"Don't tell me this bill won't help those in the middle," he implored the chamber, voicing support for the proposal.
But Democratic representatives argued the proposal would help the state's wealthiest citizens.
"The problem, Mr. Speaker... is that the biggest winners are Michigan's wealthiest residents," said Rep. Jeremy Moss, D-Southfield.
The House met from more than 12 hours on Wednesday and Thursday, going through the night and into the early hours of Thursday morning. For much of that time key lawmakers working on the plan, including Leonard, bill sponsor Rep. Lee Chatfield, R-Levering, and House Tax Policy Committee Chair Rep. Jim Tedder, R-Clarkston, were pulling members into a back room for small meetings.
Republicans also caucused for more than an hour late Wednesday night.
Even if the proposal had passed the House passage, it's not clear that the Senate would be on the same page.
Senate Majority Leader Arlan Meekhof, R-West Olive, voiced concerns on the original plan to eliminate the income tax. Asked about the first plan to lower the income tax to 3.9 percent on Wednesday, he remained tepid.
"They must not have had the votes for the previous plan, otherwise they would've run it. So if they're successful in sending it over we'll take a look at it," Meekhof said.
And Gov. Rick Snyder, who would have to sign the bill for it to become law, has been critical of the proposal on fiscal grounds. He said in a statement on Tuesday the first plan to lower the income tax to 3.9 percent would leave a revenue hole that would affect the state's abilities to address priorities like road funding.
The House moved to reconsider after the failed vote, meaning the bill could come up again at any time. Asked if he'd make another run at the legislation in the House, Leonard said we'd "see where it goes."