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.
Map of the Day: Navigating the IRS
The Taxpayer Advocate Service – an independent organization within the IRS whose roughly 1,800 employees both assist taxpayers in resolving problems with the tax collection agency and recommend changes aimed at improving the system – released a “subway map” that shows the “the stages of a taxpayer’s journey.” The colorful diagram includes the steps a typical taxpayer takes to prepare and file their tax forms, as well as the many “stations” a tax return can pass through, including processing, audits, appeals and litigation. Not surprisingly, the map is quite complicated. Click here to review a larger version on the taxpayer advocate’s site.
A Surprise Government Spending Slowdown
Economists expected federal spending to boost growth in 2019, but some of the fiscal stimulus provided by the 2018 budget deal has failed to show up this year, according to Kate Davidson of The Wall Street Journal.
Defense spending has come in as expected, but nondefense spending has lagged, and it’s unlikely to catch up to projections even if it accelerates in the coming months. Lower spending on disaster relief, the government shutdown earlier this year, and federal agencies spending less than they have been given by Congress all appear to be playing a role in the spending slowdown, Davidson said.
Number of the Day: $203,500
The Wall Street Journal’s Catherine Lucey reports that acting White House Chief of Staff Mick Mulvaney is making a bit more than his predecessors: “The latest annual report to Congress on White House personnel shows that President Trump’s third chief of staff is getting an annual salary of $203,500, compared with Reince Priebus and John Kelly, each of whom earned $179,700.” The difference is the result of Mulvaney still technically occupying the role of director of the White House Office of Management and Budget, where his salary level is set by law.
The White House told the Journal that if Mulvaney is made permanent chief of staff his salary would be adjusted to the current salary for an assistant to the president, $183,000.
The Census Affects Nearly $1 Trillion in Spending
The 2020 census faces possible delay as the Supreme Court sorts out the legality of a controversial citizenship question added by the Trump administration. Tracy Gordon of the Tax Policy Center notes that in addition to the basic issue of political representation, the decennial population count affects roughly $900 billion in federal spending, ranging from Medicaid assistance funds to Section 8 housing vouchers. Here’s a look at the top 10 programs affected by the census:
Chart of the Day: Offshore Profits Continue to Rise
Brad Setser, a former U.S. Treasury economist now with the Council on Foreign Relations, added another detail to his assessment of the foreign provisions of the Tax Cuts and Jobs Act: “A bit more evidence that Trump's tax reform didn't change incentives to offshore profits: the enormous profits that U.S. firms report in low tax jurisdictions continues to rise,” Setser wrote. “In fact, there was a bit of a jump up over the course of 2018.”
