Republicans Backsliding After Solid Reforms

The GOP-controlled Michigan Legislature in 2012 enacted a wide array of potentially transformational government reforms. In 2013, a new Legislature is backsliding and risks fully slipping into its business-as-usual mode.

Recent examples include a measure to implement Obamacare’s Medicaid expansion and to raise many fees. Coming soon may be a net-sales tax increase on internet shoppers, and authorizing new local government borrow-and-spend powers.

On Tuesday legislation (House Bills 4202 and 4203) that would permit additional sales tax revenue to be collected on E-commerce was advanced by the House Tax Policy Committee. Formally, this is known as the “Main Street Fairness” tax but it has also been called the “Amazon Tax,” as it exploits an innovative “affiliated merchant” marketing program pioneered by the online giant Amazon.com.

Proponents of the measure claim it not a tax increase but is instead “tax fairness.” What they can’t deny is that it will increase government revenues, and that they have not linked it to any off-setting tax cuts elsewhere to make the package “revenue neutral.” For some of these politicians, that means they are breaking an explicit promise they made to voters.

Six of 10 Republicans on the House Tax Policy Committee voted for the internet tax package. The two bills were introduced by Republicans Eileen Kowall and Rob VerHeulen. Rep. Kowall sponsored HB 4202 despite signing the Americans for Tax Reform pledge not to vote for tax increases.

This might not be the only example this week of Michigan’s political class reverting to their pre-Tea Party behavior. The full House could soon vote on Senate Bill 257, which is designed to increase the list of items on which a “Business Improvement Zone” can spend money. This bill is sponsored by Sen. Mike Kowall (husband of Eileen, above).

Mackinac Center analysts have called these  “borrow and spend entities,” as they have the power to borrow for new government spending projects, and make the ensuing debt-service payments by imposing new “special assessments” (property taxes) on property owners in a particular area.

This is similar to a bill introduced last summer by Republican Rep. Joe Haveman that would have created “tax and borrow” authorities known as “Neighborhood Enhancement Districts” with the power to impose property tax increases on unwilling participants. No vote of the people would be required. Fortunately that bill did not go anywhere, but the fact that this tax hike facilitation was even introduced is disheartening.

That being said, we should not forget that this is being done after many solid, market friendly reforms: a new right-to-work law; a business tax cut; balanced budgets sans gimmickry; the lifting of the charter school cap and the welcome death of Michigan’s counterproductive Michigan Economic Growth Authority. Indeed, the Mackinac Center has catalogued nearly 40 reforms advanced in Lansing that deserve applause. You can read about 2011 and 2012 accomplishments here and here.

Doing the right thing at work on Monday and Tuesday, however, in no way should grant our employees permission to do the wrong thing the rest of the week. Let’s hope that Lansing leadership again embraces transformational reform and rejects what appears to be a penchant for government growth and intervention.

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Michael LaFaive is director of the Morey Fiscal Policy Initiative at the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.