Michigan Legislature Overrides Snyder's Veto of Tax Cut

Jan 17, 2018

The Republican-led Michigan Legislature voted Wednesday to override Gov. Rick Snyder's veto of a speedier tax cut for those who trade in their car for a new one, the first override in his tenure and just the fourth in the last 67 years.

Senate Majority Leader Arlan Meekhof said the "timing was right" — the same day the chamber approved a bill to keep intact and boost Michigan's personal tax exemption, which is at risk of being eliminated under the recent federal tax overhaul due to the way the state tax code is linked to the U.S. code. He downplayed any concerns that the override bid will cause a rift in his relationship with the Republican governor.

"I'm more focused on the money that the taxpayers send us — how much more of it should be put back in their pocket," said Meekhof. Senate Democratic Leader Jim Ananich said the override vote was "long overdue."

The Senate voted unanimously to override the Republican governor. The House voted 85-23 — more than the two-thirds support needed.

Lawmakers have been seriously considering an override since July, when Snyder turned down legislation to accelerate the sales tax break for car buyers. He cited "additional financial strain" for the state and said the bills conflicted with a previous compromise to phase in tax relief for those looking to offset the cost of an automobile or RV with a trade-in.

Overrides are rare, having only occurred previously in 2002, 1977 and 1951.

A law enacted in 2013 lets those who purchase a car or RV subtract the value of their trade-in from the sales price of a new one for tax purposes. The legislation vetoed by Snyder more quickly phases in how much of the trade-in value can be deducted.

The credit now is $4,000 — saving people up to $240 in taxes — and rises $500 annually until 2039, at which point there will be no limit on the trade-in value excluded from taxation. The bills speed the phase-in of the tax break for car purchases to 2029, 10 years sooner. The trade-in credit jumps to $5,000 in 2019 and increase by $1,000 each year after.

The legislation also fully exempts from taxation the value of an RV trade-in used to buy a new RV, mirroring a provision for boats included in the 2013 law.

The nonpartisan House Fiscal Agency said the state will lose an extra $2.1 million in the first year and about $3 million more each year, mostly in the $14 billion-plus fund that pays for K-12 schools.

Also Wednesday, the Senate unanimously backed a bill that would gradually raise the personal tax exemption to $5,000, with future inflationary adjustments. That is $700 more than the current planned raise, equating an annual $30 tax cut per individual.

Snyder has proposed keeping intact and boosting Michigan's personal exemption to $4,500 to offset unintended consequence of the federal tax cuts. But he has budgetary concerns with going beyond that.

The sponsor of the tax cut, Sen. Jack Brandenburg of Macomb County's Harrison Township, said the proposed $210 million in savings would give "meaningful and significant relief to all taxpayers in our state while being responsible with our tax dollars."

The House, meanwhile, introduced a separate tax cut plan on Tuesday.