Michigan roads would see an influx of cash, but low-income workers would lose a popular tax credit, under a plan approved Wednesday in the Republican-led state House.
The 12-bill package, advanced to the Senate in a series of mostly-narrow votes, is projected to pump $1.1 billion a year into roads by 2019 without a major hike in sales or gas taxes.
The plan is largely reliant on existing state revenue, eventually dedicating $792 million a year in general fund money to roads while diverting $134 million in funding for the Michigan Economic Development Corporation.
“This is an exercise in needs and wants,” House Speaker Kevin Cotter, R-Mt. Pleasant, said in a floor speech, noting that if rosy revenue projections are not realized, the plan would force lawmakers to re-prioritize roads spending over other budget areas. “This is what families have done throughout challenging times and continue to do today.”
The plan would also generate some new revenue, in part, by eliminating the Michigan version of the Earned Income Tax Credit for low and middle-income workers, saving the state upwards of $115 million a year.
Democrats blasted several parts of the plan, saving their harshest criticism for the EITC elimination bill, which was narrowly approved in a 57-52 vote, with a handful of Republicans joining them in opposition.
“To pay for this by raising taxes on the working poor and working middle class families who are struggling to get by, while the state has lavished tax break after tax break on corporations, is shameful,” Minority Leader Tim Greimel, D-Auburn Hills, told reporters after the vote.
Roughly 780,500 taxpayers qualified for the Michigan EITC in 2013, according to the state treasury, with the average credit totaling $140. Larger credits are given to families at or near the poverty line with children.
The state EITC is based on the larger federal version, which was originally signed into law by Republican President Gerald R. Ford and expanded by President Ronald Reagan but has since fallen out of favor with some conservatives.
Republican Rep. Aric Nesbitt called the refundable tax credit a “welfare subsidy” and a “handout to those that don’t pay income taxes” that was enacted at the state levelwhen Michigan had a double-digit unemployment rate, which is no longer the case.
“This helps ensure a flat and fair system to ensure investment in our state and to ensure that we are growing our economy,” said Nesbitt, R-Lawton. The EITC “is how our state used to do business — handouts, giveaways.”
The House GOP roads plan would generate additional revenue by raising the state diesel tax from 15 to 19 cents to match gas, indexing all fuel taxes to inflation and creating new surcharges on electric vehicles ($100) and hybrids that get over 40 mpg ($30).
Other bills in the package would require more construction warranties and competitive bidding on road projects at the state and local level.
The package — the first legislative roads proposal advanced since voters soundly rejected a complicated ballot measure on May 5 — has faced significant criticism, both within and outside of the Legislature.
Democrats, calling the plan a “fantasy,” said it relies to heavily on projected economic growth. Advocates for the working poor have ridiculed the EITC proposal, while Gov. Rick Snyder and business groups have said that shifting economic development funding to roads could undermine the state’s ability to attract and retain job creators.
“The House road funding plan is the wrong direction for Michigan,” Doug Rothwell, president and CEO of Business Leaders for Michigan, said in a statement.
“Michigan needs a permanent, long-term solution to increase road repair funding without raiding the General Fund and hurting other critical priorities that are important to our economy. The revenue should come from the users of our roads and bridges and be sufficient to ensure good quality road and bridge conditions.”
Cotter, speaking with reporters after session on Wednesday, acknowledged the pushback against the plan but called it a “great start” in road funding discussions, which are likely to continue through the summer as the Senate prepares its own plan.
“I’m not dug in on any piece of this. I’m dug in on solving the problem,” Cotter said. “If solving the problem means that the Earned Income Tax Credit isn’t part of it, I’m open to that. If any other part of this plan is taken out, and it means we get the problem solved, I’ll be open to that as well.”
House Democrats proposed dozens of amendments to the package on Tuesday, all of which were rejected by the Republican majority in a series of perfunctory voice votes.
A package of amendments proposed by Rep. Jon Hoadley, D-Kalamazoo, would have increased permit fees for overweight and oversized trucks — just like an early road funding plan approved by the Republican-led House in May of 2014.
Rep. Sam Singh, D-East Lansing, proposed an amendment that would have lowered truck weight limits in Michigan, which allows the highest weights in the nation but requires loads to be spread over multiple axles.
“Maybe that’s something the Senate will consider, but right now I’m proud of this package,” Cotter said.