In an attempt to resolve Michigan’s
$349.6 million school aid fund deficit, state Senate Majority
Leader Ken Sikkema (R-Wyoming) has proposed delaying the Jan. 1
income tax cut until July 1. While prudent fiscal policy would
dictate forgetting about the cut, not delaying it, this proposal
provides a possibility for bipartisan leadership and cooperation to
resolve the state’s enormous budget crisis. As one of the
first Republicans to propose the delay, Sikkema’s
announcement comes as both a commendable act of bipartisanship and
a responsible idea for eliminating the budget deficit.
- Mira Levitan
Currently, the state’s budget deficit stands at $920
million. To close this gap, Gov. Jennifer Granholm has recently
proposed delaying the cut, which would drop the income tax rate
from 4 percent to 3.9 percent, for one year to save the state $115
million. These funds would be used to avoid cuts in state spending
for K-12 education. Sikkema, on the other hand, wants to delay the
cut until only July, which he expects to save the state about $77
million. He also wants to distribute additional revenue equally
between public universities, K-12 schools and local
governments.
The measly income tax cut would save a family of four with
annual earnings of $62,000 about $50. Any personal benefits brought
about would be vastly disproportional to the damage done to the
state’s budget, particularly in these times of deficit. For a
family of four, a $50 cut is not enough for much more than a dinner
at a moderately priced restaurant. However, if all the money were
pooled together, the total could go far at the state level. The
money is more effective at the state level, where it can be used
for education funding, an area likely to suffer as a result of the
cuts.
Granholm is expected to issue an executive order tomorrow to the
House and Senate appropriations committees, but approval from both
chambers of the Republican-controlled Legislature is needed for any
tax changes. Even with Sikkema’s support, this could prove
difficult because there is disagreement on the matter among other
Republicans.
Under Granholm’s proposal to delay the cut for a year,
school districts would still see a $70 per-pupil cut, and that
number would be higher under Sikkema’s plan to delay the cut
until July. If the state does not delay the tax cut at all, each
school would lose $196 per student.
Adequate funding is especially important for higher learning.
Even minor cuts can have drastic effects. As a result of funding
cuts last year, every public university in the state had to raise
tuition. The University’s students were hit hard, with a
6.5-percent tuition increase. Unless the state gets its financial
situation in order, more tuition spikes could be on the
horizon.
It is refreshing that Sikkema has realized the negative effects
of the tax cut. He has also, however, proposed phasing out the
Single Business Tax on health care benefits, which will cost an
additional $15 million. Unfortunately, this is not the time for
even well-intentioned tax cuts. House Speaker Rick Johnson
(R-LeRoy) needs to join his counterpart in the Senate and sign onto
the idea of delaying the income tax cut. With bipartisan
cooperation, progress is possible.