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Snyder proposes huge budget cuts

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By Chris Christoff
Courtesy MCT Campus

Gov. Rick Snyder uncorked a radical new budget plan on February 17 that he says will stimulate new jobs by slashing $1.8 billion from business taxes statewide and cutting wide swaths through state spending, including money for schools, communities, universities and prisons.

Snyder began a personal appearance at 11 a.m. to unveil the budget before an unusually large gathering of four House and Senate committees that decide spending and tax matters, and an overflow crowd in a Senate office building.
His plan calls for the most far-reaching changes in state taxing and spending in nearly 20 years, affecting virtually every constituency in the state and making good on his pledge to shake up the Lansing establishment.

Snyder called it a defining moment, and said his plan will do things that should have been done 30 years ago, and that the state has built up $47 billion in debt — $4,700 for every person in the state.

“This is more than a budget or tax proposal, this is an opportunity to stop living in the past and start looking to the future.”

“We are going to build a great state for our children and their future,” he added.

He said his plan presents a fairer, simpler tax system for businesses, and shared sacrifice across the state to get government costs under control, with a budget that aims to serve the public, not just spend its money.

Snyder said it is time to stop offering tax incentives to lure companies to Michigan, a practice Lt. Gov. Brian Calley called a form of bribery that doesn’t help the economy grown in the long term.

“Let’s stop picking winners and losers, let’s start being fair, let’s start letting free enterprise work,” Snyder said.

Calley said the tax changes would make Michigan among the most competitive in the Midwest for businesses.

His plan closes a projected $1.4 billion general fund deficit, and shifts an estimated $422 million surplus in the School Aid Fund to pay for community colleges, rather then the general fund.

As he promised for months, Snyder’s plan would replace the reviled Michigan Business Tax with a flat 6% corporate tax on C corporations, an idea that has had mixed reviews among business groups.

Smaller businesses — about 95,000 — would no longer pay a state business tax.
But many individual taxpayers would pay $1.7 billion more in income taxes through the elimination of long-held exemptions.

Pensions would no longer be exempt, and the $3,700 personal income tax deduction would be phased out for individuals making more than $75,000 a year and couples making more than $150,000.

A tax credit for the working poor would be eliminated.

Tax credits for filmmakers, brownfield redevelopment and other businesses would be eliminated, although those already granted would be left alone.

Industries would have to argue their case to restore those credits.

It’s a two-year budget plan, rather than the standard one-year budget, the second year a spending blueprint rather than a legally binding budget.

“State government has been spending more than it receives for far too long. A gaping budget deficit and serious problems have been the result,” Snyder says in his budget message.

“These are problems that cannot be fixed with accounting gimmicks or a one-time infusion of federal money. These are problems that require the resolve to make tough decisions.”

Budget director John Nixon said the stringent budgetary changes would make Michigan among the financially strongest states.

“A lot of people are going to be unhappy with this budget,” he said. “But this is the right, responsible budget.”

“This is big stuff that we’re about to do here,” he added.

Snyder, a wealthy former venture capitalist, announced he would accept only $1 in annual pay instead of the $171,000 governor’s salary.

Snyder’s budget proposal is certain to ignite anger, intrigue and hand-wringing among lawmakers and lobbyists representing many constituencies that would take financial hits.