Mich. House starts tax votes; more likely to come

LANSING, Mich. — Democratic lawmakers have begun what could be an uphill fight to raise some taxes and find more revenue for a college scholarship program, health care, and local governments in Michigan.

The Democratic-led House passed bills Tuesday, mostly along party lines, that would increase fees on doctors and stop an inflationary increase in the personal income tax exemption from taking place. Another bill passed by the chamber signals the intent to reduce credits against Michigan’s main business tax by up to 15 percent, saving more than $100 million, although the specifics would be subject to negotiation with the Republican-led Senate.

Bills that could be voted on as early as Wednesday would raise taxes on tobacco products except cigarettes and charge higher fees for liquor licenses that let bars serve alcohol until 4 a.m. Another bill would freeze or roll back an income tax credit for working low-income residents.

All of those bills could have a tough time passing in the Republican-led Senate, where leaders say they want to erase the state’s $2.8 billion budget deficit with spending cuts and federal stimulus money — not tax increases.

The House’s income tax exemption vote Tuesday was 58-51. The state would save roughly $55 million through the legislation, but taxpayers wouldn’t get the extra $4.35 for each person claimed as a deduction on their income tax form that they would have gotten without the freeze.

The vote was 56-52 to put a 3 percent tax on doctors to raise more federal matching money for Medicaid programs. Doctors who see Medicaid patients would benefit from higher reimbursement rates, but doctors who treat few or no Medicaid patients would lose out.

Democrats say the extra money — roughly $300 million to $400 million if all the proposals are approved — would restore the Michigan Promise Grant college scholarship, boost health care programs and lessen the decrease in revenue sharing payments that go to local governments to pay for services such as police and fire protection. The revenue increases did not go far enough for some, including Democratic Gov. Jennifer Granholm.

“They’re very narrow, they’re very focused. And they’re tied directly to programs that people care about,” Granholm said. “(But) they don’t go as far as I would have wanted them to go, and I think we’ve got more work to do.”

The governor last month proposed raising $685 million in new revenue by increasing some taxes and trimming business tax credits to balance the budget that was to be in place by Oct. 1.

The state is running under an interim budget that expires at the end of the month. Lawmakers couldn’t agree on final votes enacting deep cuts in some programs.

Republican Senate Majority Leader Mike Bishop isn’t promising a warm welcome for the revenue bills.

“It’s really bad public policy to try and use a Band-Aid to close a gaping wound,” he said. “To this point, I don’t have a single member who has come to me and said they support any of these tactics and gimmicks.”

Bishop, who has insisted on balancing the budget entirely with spending cuts and federal stimulus money, also said any solution has to be long-lasting.

“I want to make sure that I don’t come across as just anti-tax. That’s not the point,” he said. “The point is trying to put in place public policy that looks into the future and puts us in a position where we can manage this crisis.”

Lawmakers have yet to pass a K-12 education budget, something they hope to get to later this week. The Michigan Department of Education can’t send federal money to schools for special education, meals and programs for low-income districts until a budget is in place.

Associated Press Writer Kathy Barks Hoffman contributed to this report.