Michigan Senate, House override veto, pass sales tax relief for auto trade-ins

Jan. 17--LANSING -- It's only happened three times in 66 years and never to Gov. Rick Snyder, but the Senate and House voted Wednesday to override Snyder's veto of a pair of bills that would provide some sales tax relief for people who are trading in cars when they buy a new vehicle.

"We have worked with the governor's office to try and address the impasse," said Sen. David Hildenbrand, R-Lowell. "Overriding the veto is not only a historic action, but also represents our democracy. It was granted to the Legislature to provide an additional check. It's not something we do often."

But this was a case where lawmakers decided to take the rare action. The Senate voted unanimously and the House of Representatives quickly followed suit Wednesday afternoon with an 85-23 vote, more than the two-thirds needed to override.

The legislation, known as the "sales tax on the difference" legislation, reduces the sales tax paid by buyers who use a trade-in toward the purchase of a car. Once fully phased in, buyers would only pay 6% sales tax on the difference between the price of the vehicle they were buying and the value given to their trade-in.

Despite unanimous votes in the Senate and 89-11 in the House of Representatives when the legislation initially passed last year, Snyder vetoed the legislation, saying it would create too much of an additional burden on the state budget.

He hadn't changed his mind Wednesday after the vote.

"Changing the tax code without a plan to pay for it challenges the conservative fiscal responsibility of the past seven years," he said in a statement. "Reinvention of the tax code balanced with responsible management of taxpayer dollars created our state's comeback, and we need to stay on the current course of long-term financial planning so we can continue our current trajectory of record economic growth and declining unemployment rates."

Senate Minority Leader Jim Ananich, D-Flint, said the tax relief was long overdue.

"We should join dozens of other states in making this critical fix," he said. "Here is something that puts money in the pockets of Michganders and supports the auto industry. We can't continue to balance the state budget on the backs of regular folks."

Speaker of the House Tom Leonard, R-DeWitt Township, said before the House vote that he was "all-in" on the override.

"He had his prerogative to veto the bill and it's our prerogative to override," Leonard said. "No one should take this personally."

The last time a veto override was successful was in 2002, when the Senate and House voted overwhelmingly to restore $845 million in state revenue-sharing payments to Michigan communities that former Gov. John Engler had cut.

The override came after the Senate also unanimously voted on a bill that would increase Michiganders' personal exemption to $5,000 by 2021. Unlike with earlier proposals, the exemption would then be indexed to inflation so it would continue to increase annually beyond that date.

"It has been no secret that my main priority is to fight for tax relief for Michigan families," said Sen. Jack Brandenburg, R-Harrison Township, who sponsored the bill. "Congress passed big and bold tax relief and it's time we do the same for families in Michigan."

While Democrats supported the tax bill, their characterization of the federal tax reform was quite different.

"This is simply to fix what the federal government created so that our people's taxes will not be raised again," said Sen. Curtis Hertel, D-East Lansing. "This corrects a great lie told to us by the people in Washington, D.C."

The tax cut bills were spawned by the recently approved federal tax cut package, which state officials have said will create an unintended state tax increase of about $1.5 billion by eliminating the state personal exemption. Snyder and Lt. Gov. Brian Calley proposed a fix that would have been close to revenue-neutral, restoring the personal exemption to $4,500, but Republican leaders in the House and Senate wanted to go further.

Also Wednesday, the House Tax Policy Committee heard testimony on bills to create a $100 tax credit for Michigan residents 62 and older and to increase the Michigan personal exemption to $4,800 by 2020.

Rep. Jim Tedder, R-Clarkston, who chairs the committee and sponsored the tax credit bill, House Bill 5422, said he did not attempt to report the bills to the full House Wednesday because he wants to move deliberately and seek bipartisan support.

The $100 tax credit for seniors is "refundable," meaning tax filers will receive $100 even if they don't owe any taxes.

If approved, it is expected to cost the state Treasury about $200 million a year, with most of that coming from the general fund.

"It's an opportunity for us to give back to the senior community and affirm that our state is a welcoming place for seniors," Tedder said.

"This is a nominal give-back to folks who have weathered the storm for many years."

The committee heard concerns Wednesday from the Michigan League for Public Policy and the Michigan Association of School Boards.

Some committee members also voiced concerns.

Rep. Jim Ellison, D-Royal Oak, addressing the bill to increase the personal exemption, said he approves the intent of the bill but he's concerned about how the tax cuts could affect future priorities.

When inflation is accounted for, "we've got less money in the general fund than we did in year 2000," Ellison said.

Tedder said he hopes to report the bills out next week.

Contact Kathleen Gray: 313-223-4430, [email protected] or on Twitter @michpoligal.

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