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.
Number of the Day: $132,900
The cap on Social Security payroll taxes will rise to $132,900 next year, an increase of 3.5 percent. (Earnings up to that level are subject to the Social Security tax.) The increase will affect about 11.6 million workers, Politico reports. Beneficiaries are also getting a boost, with a 2.8 percent cost-of-living increase coming in 2019.
Photo of the Day: Kanye West at the White House
This is 2018: Kanye West visited President Trump at the White House Thursday and made a rambling 10-minute statement that aired on TV news networks. West’s lunch with the president was supposed to focus on clemency, crime in his hometown of Chicago and economic investment in urban areas, but his Oval Office rant veered into the bizarre. And since this is the world we live in, we’ll also point out that West apparently became “the first person to ever publicly say 'mother-f***er' in the Oval Office.”
Trump called Kanye’s monologue “pretty impressive.”
“That was bonkers,” MSNBC’s Ali Velshi said afterward.
Again, this is 2018.
Chart of the Day: GDP Growth Before and After the Tax Bill
President Trump and the rest of the GOP are celebrating the recent burst in economic growth in the wake of the tax cuts, with the president claiming that it’s unprecedented and defies what the experts were predicting just a year ago. But Rex Nutting of MarketWatch points out that elevated growth rates over a few quarters have been seen plenty of times in recent years, and the extra growth generated by the Republican tax cuts was predicted by most economists, including those at the Congressional Budget Office, whose revised projections are shown below.
Are States Ready for the Next Downturn?
The Great Recession hit state budgets hard, but nearly half are now prepared to weather the next modest downturn. Moody’s Analytics says that 23 states have enough reserves to meet budget shortfalls in a moderate economic contraction, up from just 16 last year, Bloomberg reports. Another 10 states are close. The map below shows which states are within 1 percent of their funding needs for their rainy day funds (in green) and which states are falling short.
Chart of the Day: Evolving Price of the F-35
The 2019 National Defense Authorization Act signed in August included 77 F-35 Lightning II jets for the Defense Department, but Congress decided to bump up that number in the defense spending bill finalized this week, for a total of 93 in the next fiscal year – 16 more than requested by the Pentagon. Here’s a look from Forbes at the evolving per unit cost of the stealth jet, which is expected to eventually fall to roughly $80 million when full-rate production begins in the next few years.
