Kathleen Gray

Detroit Free Press Lansing Bureau

LANSING — It was the first bill up for a final vote this year and the process to get enough votes to cut the state's income tax from 4.25% to 3.9% over the next four years was long, brutal and in the end, the Republican leadership in the House couldn't muster the votes for the cut.

For nearly 12 hours, Republican leadership in the House of Representatives twisted arms and cajoled their fellow lawmakers to pass a bill that they had deemed a priority. When the House of Representatives started session at 1:30 p.m. Wednesday, they were more than a dozen votes shy of the 55 needed to approve the tax cut.

By 1:30 a.m. Thursday, 12 Republicans joined all but one Democrat in voting against the cut, defeating it by a 52-55 vote. It came after leadership tried to draft a sweetener to make it palatable enough for a majority of the Republican caucus to get the deal done. They added a provision that if the state's rainy day fund falls below $1 billion, the income tax cut would be paused in the final two years. Gov. Rick Snyder has proposed adding $260 million to the $734 million fund in the 2017-18 budget year, which begins on Oct. 1, to bring the balance close to $1 billion.

Democrats argued that a worker at the lower rung of the wage scale would not benefit nearly as much as the wealthiest in the state.

"Under this bill, a person in my neighborhood making $35,000 would see a savings of about $10 a month. And the person making $35 million a year would see a savings $122,500 in income tax by year four," said Rep. Jeremy Moss, D-Southfield. "That to me is a huge problem. I wasn’t sent here to give an astronomical tax break for millionaires and billionaires."

State Rep. Henry Yanez, D-Sterling Heights, said the bill isn't about true tax relief, but rather was politically motivated and will hamper the state's ability to do things like fix the gaping sinkhole in Fraser.

"This isn't about the people of Michigan and making people whole," he said. "This is about advancing the political careers of the people in this room."

Republicans said after seven years of tax cuts for businesses, it was time to give something back to the "MAWS" - the Michigan Association of Working Stiffs.

"I had concerns with the original bill. I think taking it to zero without a plan to replace it would jeopardize our ability provide essential state services," said Rep. Robert VerHeulen, R-Walker. "But I support it going to 3.9%. This will ensure that we will not jeopardize our constitutional mandate to balance the budget. I’ve always been motivated to stretch on behalf of the taxpayers."

State Rep. Thomas Albert, R-Belding, said he's struggled through difficult times after leaving the military and finding a tough job market.

"We have numerous programs for the less fortunate and the numerous people at the top. Why can’t we help the ones in the middle," he said. "My wife and I know what it’s like to struggle ... Don’t tell me this bill won’t help people in the middle."

Related:

Michigan won't scrap income tax, but proposal looks to pare it to 3.9%

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The latest version of the proposal was a big departure from the original House plan, which would have cut the tax to 3.9% in the first year and then gradually eliminate the tax over the next 39 years.

But leaders ran up against opposition from nearly all Democrats and many Republicans, including Gov. Rick Snyder, who weren't prepared to blow a $1.1 billion hole in the state budget over the next four years without a plan on either how to replace the money or which parts of the budget would be cut. Republicans voting against the bill were: Reps. Julie Calley, of Portland, Larry Inman, of Williamsburg, Chris Affendoulis, of Grand Rapids Township, Daniela Garcia, of Holland, McCready, of Birmingham, Dave Pagel, of Berrien Springs, Brett Roberts, of Eaton Township, Dave Maturen, of Vicksburg, Jim Lilly, of Park Township, Jason Sheppard, of Temperance, Kathy Crawford, of Novi, and Scott VanSingel, of Grand. Democrat Scott Dianda, of Calumet, was the lone Democrat to vote for the cut.

"With 24 years experience in governmental budgeting, this whole process is totally backward. We have not even talked about potential cuts or funding priorities," said Inman. "We have not even looked at other states to see how they have handled drops in their income tax rate and we have no contingent plans for any budget short falls."

The House Tax Policy committee approved the income tax elimination on a party-line vote last week after one 90-minute hearing, cutting the state's largest source of revenue for the general fund that supports everything from state police, environmental protections, the Corrections department and revenues to local government.

"Any day you have the opportunity to put more money back in the pockets of hardworking families is a good day," said Rep. Lee Chatfield, R-Levering, who sponsored the legislation. "Today is that day."

The new version of the bill would reduce the income tax to 4.15%, beginning on Jan. 1, 2018, then to 4.05% in 2019, 3.95% in 2020 and 3.9% in 2021. The lost revenue in the first year, which comes three months into the fiscal year, would be $195 million; in the second year, it would be $463 million; in the third year, it would be $780 million, and by the fourth year, it would cumulatively translate into $1.1 billion less in state revenue.

It was that figure - and the lack of a plan to replace the money - that prompted Gov. Rick Snyder to say he was still opposed to the bill because he had "a billion dollars worth of concerns."

The state Senate isn't much more supportive either. Senate Majority Leader Arlan Meekhof, R-West Olive, said it is way too early to put his stamp of approval on the proposal.

"We have lots of other ideas on how to give people value for their money," he said. "It has some significant opportunities, but opens up further opportunities to look at all the things we do."

And Sen. Ken Horn, R-Frankenmuth, said he wants to make sure it's a fair and reasonable approach to tax policy. "And we have to make sure the balance sheet works out."

Speaker of the House Tom Leonard, R-DeWitt, said he knew before the vote was taken that he didn't have the votes, but that a majority of the caucus wanted to take a stand and say publicly that they supported a tax cut. The vote could be reconsidered at some point in the future.

"We'll see where it goes," he said.

House Minority Leader Sam Singh, D-East Lansing, said Democrats want to provide tax cuts for working families and predicted that a more deliberate, thoughtful approach could produce some sort of tax cut that would go more directly to middle class families.

There are seven states without an income tax — Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming — but most make up the difference with higher sales or property taxes or much higher state revenues from taxes on coal mining (Wyoming) or oil drilling (Alaska).

Contact Kathleen Gray: 313-223-4430, kgray99@freepress.com or on Twitter @michpoligal