Senator Switalski, under his constitutional right of protest (Art. 4, Sec. 18), protested against the passage of Senate Bill No. 201 and moved that the statements he made during the discussion of the bill be printed as his reasons for voting “no.”
The motion prevailed.
Senator Switalski’s first statement is as follows:
Last month, over my objection, we passed Senate Bill No. 1 which phased out the Michigan business tax surcharge and eliminated about $600 million in revenue without identifying the budget cuts or replacement revenue. I said at that time it was fiscally irresponsible and bad tax policy. Well, these three bills we are just concluding our votes on today represent more bad tax policy that will cost us about $300 million today.
Once again, we have neither identified replacement revenue nor made spending cuts. So after two months of bad tax policy, we have created about a $1 billion structural deficit. So we are confronted, my friends, with the ultimate legislative irony. You may think I jest, but this is true. It is like Freaky Friday in the Senate because the taxation and appropriations committees have reversed roles. It turns out that our appropriators are the responsible bunch. I always thought we were supposed to be the big spenders. But we are constantly cutting budgets, saying no to our colleagues and interest groups, and seeking new spending. But the tax committee that is supposed to be the penny pincher who raise and conserve the necessary revenue are instead spending like crazy giving away tax cut after tax cut and running up the deficit.
So my solution is simple. Let’s put the appropriators on tax policy and put taxation in charge of spending the stimulus. That way, we will spend the stimulus in no time and Appropriations will balance the budget. You may think I jest, but there is some truth in this.
That brings us to Senate Bill No. 201 which, I believe, is another tax cut in search of a rationale. It will cost us $140 million by allowing vehicle purchasers to pay sales tax only on the difference between their new and old vehicle. Will it stimulate auto sales? It will not. People are not buying cars because they are scared about their jobs and can’t get loans. Falling sales have nothing to do with the sales tax on a car. The auto companies themselves have tried a variety of incentives, including zero percent financing, $2,500 rebates, cash back, and $500 auto show bonuses to little effect. Senate Bill No. 201 asks us to believe that a person will now buy a $25,000 car because he will save $600 in sales tax. That is a dubious proposition. The fundamental flaw in this bill is that the vast majority of people who are buying cars already will now get a bonus for something that they are doing anyway.
So I believe the supporters of Senate Bill No. 201 owe us an accounting of what is their estimate of the new sales this credit will generate. How does that compare with the number of sales that will occur without the credit? Will it increase sales 2 percent, 5 percent, and 10 percent? The advocates of this bill should tell us how much this will increase sales, and then we should compare the cost of this giveaway to the sales that would have occurred anyway.
That is not rational tax policy. What is the cost to Michigan’s quality of life? Over $100 million to the School Aid Fund—that is the loss that this bill represents. The same school aid that the Governor just cut by $59 per pupil.
Seven million dollars to the Comprehensive Transportation Fund—that is the fund that is declining so low that we stand to leave hundreds of millions of federal dollars on the table in a couple of years. This bill will create more potholes. How about the $23 million cut to revenue sharing payment to local governments? I thought we were committed to avoiding cuts to revenue sharing. I guess the supporters of this bill have other priorities.
These losses, substantial though they are, are estimated at the current depressed sale of auto sales. When auto sales rebound, these costs will nearly double. But when sales rebound and the incentive is no longer needed, I argue that it is not needed now. This give away is permanent.
Senator Switalski’s second statement is as follows:
You can call up anybody and ask them, “Hey, should I cut your taxes?” and they will generally tell you, “Yeah, yeah, that’s a good idea. Cut my taxes.” You can call up the schools and say, “Hey, should I cut your payments by $100 million?” They would probably object.
You could call up local government, “Hey, should I cut you guys your revenue sharing by $30 million?” They would probably object.
There are choices that you make. When you give somebody an easy choice with no consequences, they’ll say, “Yes.” If you give somebody a tough choice that’s going to hurt them, they generally say, “No.”
Senate Fiscal did an estimate of what this would increase sales by. They suggested that we’d have $5 million for every 1 percent increase in sales. So if we got what I think is a huge increase, 10 percent increase in sales, that would be $50 million. So we’re giving away $140 million to generate $50 million?
if we had the FAIR TAX, we wouldn't be taxed on USED CAR transactions at all.
look it up.
This bill should pass. The state is double dipping us now, essentially charging tax twice on the trade.