Michigan House legislators block state income tax break

Kevork Djansezian  Getty Images

On 24 June, 2016, the Republican Speaker of the U.S. House of Representatives, Paul Ryan, and House Ways and Means Chairman Kevin Brady released a sweeping "Blueprint" proposal to reform the U.S. tax code.

Speaker Tom Leonard wanted to cut it from 4.25% to 3.9% next year and then slowly phase it out over 40 years, but Governor Snyder says the State can't do it without finding another source of revenue.

In a session that began Wednesday afternoon, House legislators stayed up all night debating the state income tax bill, taking a final vote after midnight. Despite this, House Bill 4001 went down in flames on a 55-52 vote.

After hours of trying to wrangle votes and a couple amendments to the original bill, Republicans in the House came up short, with several of their own members voting against the bill.

Under the House proposal for a border-adjusted tax, US companies would pay a 20% tax rate on the full value of imported goods, while export revenue would be tax-free. They claimed that the tax cut would spur economic growth, but economists at the Brookings Institute have said that any economic boost from tax cuts is not obvious or a given. Because the US imports and consumes so much, it would raise $1 trillion over 10 years in revenue-enough to help lower the corporate tax rate to 20 percent from the current 35 percent.

Republican Gov. Rick Snyder has voiced concerns about the budget implications of a tax cut. In 2021, a person with $50,000 in annual taxable income could pay $175 less than today if the legislation is signed into law.

Beginning in 2023 this bill would also provide for an automatic decrease in the income tax rate when, generally speaking, General Fund revenues increase from one year to next by more than inflation.

President Donald Trump on Thursday spoke favourably about an export-boosting border adjustment tax proposal being pushed by Republicans in the U.S. Congress, but did not specifically endorse it.

Conservatives who were pushing the tax cut say it should return to 3.9 percent where it was back in 2007.

"We have a responsibility in government to fulfill our promises".

Democratic Rep. Brian Elder of Bay City said his average constituent would get a tax cut equaling a "paltry $3 a week".



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