State Legislature OKs Tax Cut, Driver Debt Forgiveness After Deal

By DAVID EGGERT, Associated Press

LANSING, Mich. (AP) - Michigan lawmakers on Wednesday began voting to cut individual taxes after a deal was struck between Republican legislative leaders and Gov. Rick Snyder, who also agreed to waive extra fees that 348,000 drivers owe for certain infractions.

The bills would gradually raise the state's personal tax exemption to $4,900 by 2021, $600 higher than what it is scheduled to rise to under current law. That would be a $25.50 tax cut per person, or $102 for a family of four, according to Associated Press calculations.

The Republican governor had proposed a smaller boost in the exemption, to $4,500, to address unintended consequences of the federal tax overhaul. The GOP-controlled House and Senate last month overwhelmingly approved an exemption of $4,800 or $5,000, respectively, along with competing plans to create income tax credits for dependent care or seniors. The proposed credits are not included in the deal.

Because the state tax code is tied to the federal code, there is concern that the reduction of the federal personal exemption to zero also nixed the state exemption and will lead to a big tax hike if no action is taken.

The tax bills would also clarify that Michigan's state income tax exemptions continue. The House passed them on 107-2 and 109-0 votes, and the Senate was expected to follow suit shortly.

All outstanding driver "responsibility" fees — which totaled $637 million last summer — would be forgiven starting in October under legislation that unanimously won Senate approval and was scheduled for a House vote later in the afternoon. Newly assessed fees would end then, too, instead of in October 2019 under existing law.

The fees were enacted by former Gov. Jennifer Granholm and legislators in 2003 to deter drivers who repeatedly violate traffic safety laws. They are imposed in addition to regular fines and have come under criticism as a budget-balancing "money grab" that disproportionately hurt low-income motorists who cannot afford to pay, perpetuating a cycle of poverty.

The state suspends the driver's license of those who do not fully pay the fees or who do not have an installment plan. Under an amendment adopted Wednesday, the $125 fee to reinstate the license would be waived for this year.

This decade, the Legislature and Snyder did away with some fees and later moved to phase out all of them.

The fees now range from $100 to $2,000 for offenses such as driving without insurance and accumulating too many points from traffic infractions.

House Speaker Tom Leonard, a DeWitt Republican who has made the debt forgiveness a top priority, said the law is "unjust" and clearing people's debt is "the right thing to do. I'm glad we're getting them their driver's licenses back."

He said the tax cut and fee forgiveness equal between $210 million and $220 million in relief for citizens.

"I am proud that we are going to deliver that today," Leonard said.

The potential budget implications of the deal were not immediately clear. But Snyder had signaled that his spending plan unveiled last week could accommodate a tax cut as long as it was not too big.

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