89.1 WEMU

Economist Says May Ballot Question Has $100 Million Loophole

Jan 29, 2015

An economic study says the May ballot proposal to raise the state sales tax could also collectively cost Michigan taxpayers $100 million more in federal income taxes.

        

The ballot proposal would raise the state sales tax by a penny on the dollar.

The study by the Anderson Economic Group says if it’s adopted, that will trigger changes in other taxes. One of them is the state vehicle registration fee. Economist Patrick Anderson says, right now, it’s deductible on federal income taxes.

“The proposal would effectively change the auto registration tax from one that is deductible                   under the federal income tax to one that is not,” he says. “I’m not sure what the whole thinking was when this was designed. It does      appear that the folks who were working on this under-appreciated the effect of changing the registration tax that’s been in place for decades.”  

That could make the ballot proposal an even tougher sell to voters. Governor Rick Snyder says it’s necessary to raise $1.2 billion dollars to fix roads and guarantee money to schools and local governments.

His office did not have a comment on the study.