Facing a staggering drop in state revenue that has pushed Michigan’s budget hundreds of millions of dollars into the red, Gov. Jennifer Granholm is proposing several new taxes in order to make up the shortfall without cutting crucial services. The Detroit News reports:
Gov. Jennifer Granholm has proposed a revenue hike of nearly $700 million — including an entertainment tax, another 25-cent boost in the cigarette tax and a penny levy on water bottles — to help erase next year’s budget deficit.
Sources closest to budget negotiations said the plan also would slightly reduce the state’s film tax credit and an income tax break for low-income families, and the governor would phase out the widely unpopular 22 percent surcharge on the Michigan Business Tax over three years starting in 2011.
The revenue increases, which would generate about $685 million a year, have not been endorsed by legislative leaders. The plan was offered in closed-door budget talks, sources said.
A spokesperson for the Senate Majority Leader seemed to indicate that they are open to increases in these particular taxes in lieu of a general increase in a major tax like the income or sales tax:
Matt Marsden, spokesman for Senate Majority Leader Mike Bishop, R-Rochester, said general tax increases “are a non-starter for us. But we understand this is a process of negotiations and compromises will have to be made.”
On my radio show Thursday night, capitol reporter Tim Skubick related that his sources say that Senate Majority Leader Mike Bishop was taking a strong public stand against any new taxes but had empowered others to negotiate some increases in particular taxes because, in the end, the state simply had to have more revenue.
If true, that might pave the way to a compromise plan to come out of the budget negotiations, one that would combine spending cuts with revenue increases that don’t increase the basic taxes that fund government.