GOP Governor Asks Voters to Raise Their Own Taxes
Michigan voters go to the polls today to vote on Proposal 1, a referendum that would hike the state sales and gasoline taxes. An unexpected twist in the story, though, is who is backing the plan and why. Support for the proposal speaks to the declining state of infrastructure in the U.S. and the increasing urgency with which states are taking matters into their own hands.
Proposal 1 is a complex mix of policy changes that would raise more than a billion dollars to fund road construction and repair, plus hundreds of millions for education and other purposes. It would do so by hiking the Michigan state sales tax from 6 percent to 7 percent. That represents a 17 percent increase in total sales taxes Michiganders will face on taxable items.
Related: America’s Energy Infrastructure in Desperate Shape
However, the bill also abolishes the sales tax on gasoline – Michigan is one of the few states in which gas is not exempt from state sales tax – and would dramatically increase the wholesale gasoline tax. The net effect, according to the Detroit Free Press, would be an increase of between 7 and 9 cents per gallon in what consumers pay at the pump. The proposal would net about $1.9 billion per year for the state’s coffers, the majority of it coming out of the pockets of Michigan’s taxpayers. (A small percentage would come from out-of-state visitors paying taxes on items purchased in Michigan.)
Normally, a $2 billion tax hike – the biggest in the state in a generation – would be the sort of thing Republican politicians would attack mercilessly, but in Michigan, Republican Governor Rick Snyder is a strong proponent of the deal. And Snyder isn’t alone. Prominent Republican and Democratic lawmakers have thrown their support behind the measure.
Related: Get Ready to Pay More Tolls If Infrastructure Isn’t Funded
The move also has significant support from the business community. Unsurprisingly, the biggest backers of the deal are the construction companies and related industries. But there is also support in the general business community, even among some companies whose products would be more expensive.
Even with substantial support from legislative leaders and businesses, though, the prospects for Proposal 1 looked poor heading into the vote today Public opinion remains generally against the proposition despite a multimillion-dollar advertising campaign by supporters that has dwarfed efforts by the opposition.
Should the vote fail, though, the state’s pothole-pocked roads and crumbling bridges won’t fix themselves, so legislators will have to find the revenue somewhere, either by increasing taxes via a different route, or cutting spending from an already tight state budget.
Chart of the Day: Boosting Corporate Tax Revenues
The leading candidates for the Democratic presidential nomination have all proposed increasing taxes on corporations, including raising income tax rates to levels ranging from 25% to 35%, up from the current 21% imposed by the Republican tax cuts in 2017. With Bernie Sanders leading the way at $3.9 trillion, here’s how much revenue the higher proposed corporate taxes, along with additional proposed surtaxes and reduced tax breaks, would generate over a decade, according to calculations by the right-leaning Tax Foundation, highlighted Wednesday by Bloomberg News.
Chart of the Day: Discretionary Spending Droops
The federal government’s total non-defense discretionary spending – which covers everything from education and national parks to veterans’ medical care and low-income housing assistance – equals 3.2% of GDP in 2020, near historic lows going back to 1962, according to an analysis this week from the Center on Budget and Policy Priorities.
Chart of the Week: Trump Adds $4.7 Trillion in Debt
The Committee for a Responsible Federal Budget estimated this week that President Trump has now signed legislation that will add a total of $4.7 trillion to the national debt between 2017 and 2029. Tax cuts and spending increases account for similar portions of the projected increase, though if the individual tax cuts in the 2017 Republican overhaul are extended beyond their current expiration date at the end of 2025, they would add another $1 trillion in debt through 2029.
Chart of the Day: The Long Decline in Interest Rates
Are interest rates destined to move higher, increasing the cost of private and public debt? While many experts believe that higher rates are all but inevitable, historian Paul Schmelzing argues that today’s low-interest environment is consistent with a long-term trend stretching back 600 years.
The chart “shows a clear historical downtrend, with rates falling about 1% every 60 years to near zero today,” says Bloomberg’s Aaron Brown. “Rates do tend to revert to a mean, but that mean seems to be declining.”
Chart of the Day: Drug Price Plans Compared
Lawmakers are considering three separate bills that are intended to reduce the cost of prescription drugs. Here’s an overview of the proposals, from a series of charts produced by the Kaiser Family Foundation this week. An interesting detail highlighted in another chart: 88% of voters – including 92% of Democrats and 85% of Republicans – want to give the government the power to negotiate prices with drug companies.
