State Ends Fiscal Year With Surplus After 12 House Republicans Defeat Tax Cut

The state of Michigan may have begun the current fiscal year with $260 million more cash on hand than previous estimates projected, according to Mitch Bean of Great Lakes Economic Consulting.

It's not unusual in a given year for the state to spend less than the amount authorized by the Legislature in annual budget bills. That’s what happened in the fiscal year that ended on Sept. 30, 2017, due to lower-than-anticipated Medicaid spending, Bean told MIRS News.

The estimated $260 million in unspent revenue is more than the $195 million taxpayers would have been allowed to keep starting next year under a 0.2 percent cut to the income tax taken up by the state House in February. The tax cut failed when 12 House Republicans joined all but one Democrat in voting against it.

Fiscal policy analyst James Hohman at the Mackinac Center for Public Policy expects state revenues to continue to rise over the next couple of years, and has argued in past articles that “Michigan can afford a tax cut.”

“Republicans who voted against tax cuts earlier this year said that the state budget could not afford to let people keep more of their own money,” Hohman said.

Many of the Republicans who voted against the tax reduction supported lower taxes on the campaign trail.

In 2007, Gov. Jennifer Granholm signed what she said would be a temporary income tax increase from 3.9 percent to 4.35 percent. Provisions in the law authorizing the tax hike would have started to ratchet it back down in 2013, but in 2012, Gov. Rick Snyder signed a bill freezing the rate at the current 4.25 percent.