Smokers, Tax Loopholes Eyed as Revenue Sources for Michigan Budget Deficit

Granholm Budget Proposal Calls For $546M In Revenues

September 9, 2009
By: Dave Rogers

Governor Jennifer Granholm outlined Tuesday a plan to raise $546.3 million to meet Michigan's budget deficit by:

Boosting cigarette and bottled water taxes,

Extending the state sales tax to professional and college sports tickets and concerts,

Slashing tax loopholes and

Cutting spending.

Both the Michigan State Chamber of Commerce (MSCC) and the Michigan League for Human Services (MLHS) said the budget proposals do little to address longterm structural problems.

"A plan is not a good plan because it's the only plan," said Sharon Parks, MLHS president. "The Senate-passed budget contains deep cuts that inflict more pain on vulnerable residents who have already been hard hit by cuts in past budgets and the governor's May executive order.

Modernizing the state's antiquated tax structure would make the most sense, said Ms. Parks, whose association has joined with a consortium of other groups to seek a graduated income tax.

At the opening of a new IBM center at Michigan State University, East Lansing, Ms. Granholm said the proposal would result in a 12 percent cut to loopholes, which would go along with a 12 percent cut in general fund spending.

In addition to the loophole cuts, the proposal calls for increasing the cigarette tax to $2.25 a pack and for a 1 cent tax on each bottle of bottled water.

Ms. Granholm said the House should begin to consider budget proposals this week, aiming for a budget agreement before the October 1 start of the new fiscal year.

Here's a summary of the expected revenues under the governor's plan:

Tax hikes on tobacco are expected to raise a combined $135 million,

The penny tax to bottled water is project to raise about $18 million,

Another $8 million would be garnered by reducing tax credits for film production,

And $83 million would come through limiting a proposed hike in state earned income tax credits for low wage workers.

Granholm is proposing another $572 million in budget cuts beyond those proposed earlier this year.

The remaining $1.8 billion deficit for general state services would be met by using federal economic stimulus funds.###