State rep proposes ‘tax equality’ bill

Measure would provide tax relief for 95 percent of Michiganders

By: Andy Kozlowski | C&G Newspapers | Published April 8, 2015

METRO DETROIT — At a town hall meeting in Madison Heights on March 25, state Rep. Jim Townsend, D-Royal Oak, discussed a bill he is working on that he hopes will make the 2016 ballot and change the way state taxes are handled in Michigan.

House Bill 4341 and House Joint Resolution K aim to address two issues: providing tax relief for the struggling middle and lower classes, and increasing revenue for infrastructure, education and other essential services. Townsend said this can be achieved through “tax equality,” which involves the adoption of a graduated income tax, already used by 35 states and the federal government.

A graduated income tax would cut state taxes for 95 percent of Michiganders — single filers with less than $80,000 in taxable income, and joint filers with less than $160,000. According to the House Fiscal Agency, this would be a total tax cut of about $827.5 million each year.

At the same time, it would gradually increase rates for the wealthiest 5 percent of taxpayers, generating $1.39-$1.59 billion. That’s a net increase of about $560-$760 million in new revenue for the state.

Townsend said that millionaires and billionaires currently pay a smaller percentage in taxes, relative to their net worth, than the middle and lower classes. The wealthiest have more accumulated wealth, which they grow with investments that are taxed at much lower rates.

As a result, he said, billionaires contribute less than the 9.5 percent contributed by a family in Flint making $20,000 a year, or a small-business owner in Howell making $60,000 a year.

By having the wealthiest pay their share, and by reducing the tax burden on most Michiganders, the economy will see a boost, Townsend said. The middle and lower classes can’t afford to save as much, so they will spend their tax cuts out of necessity, stimulating the economy.

In order to make the 2016 ballot, the proposal will require the signatures of more than 300,000 residents. If voters then approve the measure, it would enshrine the graduated income tax in the state constitution. Without it, Townsend said the middle class would continue to erode.

“The middle class is what pays for everything in this state. … The problem is it isn’t as big as it used to be,” Townsend said. “What’s been happening in our state for the last 15 years … is the middle class has been crumbling. It affects our ability to invest in things, to solve our problems, to make our communities and our state more vibrant and more prosperous.”

Since 1999, the median household income in Michigan has fallen from 16th in the nation to 35th, a decline of $15,633, or more than 24 percent.

At the same time, recent tax reforms have made a bad situation worse, Townsend said, by shifting more of the tax burden off corporations and onto individuals, to the tune of $2 billion annually.

Michigan now ranks 48th in the nation in the percent of tax revenue contributed by big business. Only two states ask less of their corporations.

One business owner at the town hall meeting said he feels more concerned about essential services than tax cuts.

“I’m middle class, and I’m a small-business owner,” said Jeremy Fisher, a Warren resident who owns Second Chance Legal Services in Madison Heights. “And, I’ll tell you, I don’t want my taxes cut. I want you to pass this proposal, without cutting my taxes, and properly fund education. That’s what I think a lot of small-business owners would rather see. You talk to them, and they say there are not enough people properly educated to fill jobs; there are not enough people in the state that have the skills that are needed. And that’s what we should focus on.”

Townsend said his proposal can accomplish both — improving state services, as well as tax relief — and that the latter will give people meaningful incentive to support it.

“One reason I think we’ve had trouble getting people to come out and vote is because we’re not offering them anything that helps them,” Townsend said, referring to low voter turnout in general. “We’ve got to have space in our message for economic populism: putting more money in the pockets of people who don’t have enough money, who are working hard, playing by the rules, and the system is rigged against them. The system takes more from them, under-invests in their communities and schools, and gives huge tax breaks to people who send the money to (Wall Street in) New York City to gamble in hedge funds.

“That’s what our system does right now, and I think people are mad about it, but they don’t know what to do about it,” he said. “But we can do something about it.”

State Rep. Jim Townsend can be reached at (517) 373-3818 or by emailing jimtownsend@house.mi.gov. For more information, visit townsend.housedems.com.



 

How much will ‘tax equality’ save the middle and lower classes?

Under the graduated income tax proposed by state Rep. Jim Townsend (House Bill 4341, House Joint Resolution K), more than 4.4 million filers (95 percent of Michiganders) would receive tax cuts — an estimated $827.5 million in savings, according to the House Fiscal Agency. This includes more than 75 percent of all business owners.

Here are some examples of savings, as detailed in Townsend’s presentation in Madison Heights on March 25:

•  A middle-class family making $80,000 a year in taxable income would save $600 (18 percent).
•  A middle-class family making $50,000 a year in taxable income would save $525 (25 percent).
•  A low-income family making $25,000 a year in taxable income would save $312 (30 percent).
•  A skilled-trades worker or college graduate making $25,000 a year in taxable income would save $263 (25 percent).

— Andy Kozlowski