LANSING (AP) – Republicans who control the state House announced a new plan yesterday to improve Michigan’s economy by selling one-third of the state’s tobacco settlement and using part of the revenue to cut business taxes.

The new proposal is the latest twist in ongoing negotiations between the House, Senate and Gov. Jennifer Granholm’s administration. The three sides have spent months trying to agree on ways to improve taxes and efforts to diversify the state’s economy.

House Republicans originally proposed using $1 billion from the tobacco settlement to fund grants and loans that could encourage high-tech businesses to expand or locate in Michigan. Now they want to use $700 million of the money to reduce the Single Business Tax and lower personal property taxes for manufacturers.

The other $300 million would be invested in up-and-coming industries, less than a third of the original amount agreed to by Senate and House Republicans and the Democratic governor.

House Speaker Craig DeRoche originally pushed for setting up the $1 billion investment fund and voted for the measure when it passed the House late last month.

But he backed away from that idea yesterday, saying it would be better to provide businesses with tax relief quickly than to create a 19-member board that would decide which high-tech projects should get grants and loans that could lead to more jobs in Michigan.

“I believe the Michigan taxpayers would recognize the highest priority is not the direction that a 19-person board might select as the industry that might replace the automotive industry,” the Novi Republican said. “We should keep the millions of jobs that are at risk in the state.”

DeRoche said the new proposal is intended to be a compromise that would pay for tax cuts the Republicans have been pushing while setting aside money to reduce the state economy’s reliance on the manufacturing industry.

But Granholm has said she would not support selling part of the state’s tobacco settlement to pay for tax cuts, spokeswoman Liz Boyd said.

“To say that we’re surprised by (DeRoche’s) latest announcement is an understatement,” Boyd said after the speaker gave reporters details of the change.

The governor has her own plan for reducing business taxes, but it has failed to get GOP support because it paid for the cuts in part by increasing payments from banks and insurance companies. It would have immediately dropped the SBT rate from 1.9 percent to 1.2 percent and created a 35 percent personal property tax credit for manufacturing and research and development property.

Leave a comment

Your email address will not be published.