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Income tax cut talks to blame for road funding impasse

Posted at 3:18 PM, Oct 14, 2015
and last updated 2015-10-14 15:18:44-04

LANSING, Mich. — While the state's roads aren't getting any better, neither are the negotiations over how to pay to fix them.

Legislative leaders in both parties on Tuesday walked away from closed door meetings, claiming they'd reached an impasse.

The reason? It appears to boil down to disagreements over tax cuts that would ultimately serve to offset proposed increases in the state's vehicle registration fees and the 19-cent-per-gallon gas tax.

Republicans are fighting hard for across-the-board income tax cuts, something leadership claims has been on the table since private "quadrant" meetings between Governor Rick Snyder and leadership began in August.

Democrats are being blamed for balking at the idea during eleventh-hour discussions, which both sides claim had been productive up until the unexpected stalemate.

"It's unfortunate they're letting their ideology stand in the way of a roads deal," Rep. Tim Greimel, D-House Minority Leader, told FOX 17. "That's the wrong approach. The wealthy are doing well, but we don't need more tax cuts for the wealthy. We've seen a lot of that from those in control in Lansing. They've paid for that by raising taxes on everybody else."

Greimel and Democrats argue tax cut talks should only target low-income workers, going on record in the past supporting restoration of the Earned Income Tax Credit for low-wage earners.  Greimel said tax cuts should either be targeted or shouldn't be included at all.

Snyder has been meeting for months behind closed doors with Republican and Democratic legislative leaders from both chambers to figure out how to raise the additional $1.2 billion needed annually for roads. The supposedly productive negotiations had been centered around a plan to raise $800 million in new revenue while relying on another $400 million from existing general fund money.

"We'd made an income tax rollback part of the plan from day one of negotiations, and yesterday they are no longer on the table," Gideon D'Assandro, spokesperson for House Speaker Tim Cotter. "Maybe we're at fault for trying to put together a bipartisan deal."

When asked about the possibility of future negotiations not including talks of income tax cuts, D'Assandro said it'd "be almost like restarting the negotiations," and signaled that wasn't a likely option.

A Senate plan from Republicans passed during the summer called for reducing the state’s 4.25 percent income tax, but those cuts would rely on growth of general fund exceeding inflation. However the plan also called for a 15-cent gas tax hike over three years tied to inflation, giving it little traction with House Republicans, some of whom are reluctant to support any type of tax increase.

With enough Republicans scoffing at the possibility of supporting such a tax hike, approval of a final deal going forward would likely rely on securing Democratic votes.

Senate Majority Leader Arlan Meekhof said he and lawmakers in his chamber remain committed to working toward a solution.

"I am disappointed that months of discussion and progress at the leadership level have stalled," he said in a statement. "But a standstill at the leadership level is not an indication of unwillingness on the part of the Senate."

In May, Michigan voters rejected Proposal 1 by a 4-to-1 margin, a defeat many in Lansing blamed on the sheer number of unrelated items tacked onto the plan.

"I think the people spoke loud and clear last May when they rejected Proposal 1," Greimel said. "They (voters) don't want a 'Christmas tree' approach that tries to be everything to everyone with a bunch of giveaways that have nothing to do with the roads. They want us to focus on roads."

For that reason, Greimel said he'd be willing to completely remove talks of income tax cuts from current discussions, a move Republican leaders don't appear to think is fair.

"I think Proposal 1 had a lot of unrelated things included in it, where the negotiations now have a lot of tax policy," D'Assandro said. "We're talking about finding $1 billion for roads. You're obviously going to affect other parts of the budget and affect tax policy. This all seems related."

On Wednesday, Snyder canceled scheduled "quadrant" meetings, instead opting to meet with leadership individually. Greimel disagreed with the plan to cancel Wednesday's meeting and said he would have preferred to continue negotiations, progress or not.

"It's immensely frustrating for me. I know it's as or more frustrating for viewers at home," he said. "We need leaders and legislators here in Lansing to do their job, and I've been very clear I want to continue to meet as long as it takes to reach an agreement."

Republican sources told FOX 17 no more than 36 hours prior to the impasse a deal had seemed inevitable, with expectations of having something to present publicly within days.

After lawmakers adjourned for summer break without a deal in August, many had hoped to have one ready before the end of the year.

Now, it's unclear what it will take to bring both sides back to the table.

"Everybody here knows we need to fix the roads, and everyone here wants to get it done as soon as possible. We just have to find a solution that can get a majority of people on board," D'Assandro said. "I think if you asked the people of Michigan to come up with a plan to fix the roads, you'd find about 10 million different plans there, too."