Lawmakers consider rare veto override of trade-in tax bill

Posted at 3:22 AM, Aug 27, 2017
and last updated 2017-08-27 03:22:58-04

LANSING, Mich. (AP) — Gov. Rick Snyder’s rejection of a speedier tax cut for people who trade in their car for a new one is provoking disappointed lawmakers to seriously consider something that has been done just three times in the last 66 years — a veto override.

A month ago, the Republican governor turned down legislation to accelerate the sales tax break. 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.

Now GOP leaders are weighing whether to enact the law anyway, a move that could complicate other legislative and gubernatorial initiatives in the final 16 months of Snyder’s tenure. The legislation won bipartisan approval 37-0 in the Senate and 88-19 in the House, which is more than the two-thirds support legislators would need for an override.

“I don’t know if there’s been a bill vetoed that has so much support,” said the sponsor, Republican Senate Appropriations Committee Chairman Dave Hildenbrand of Lowell.

Snyder this summer also vetoed legislation that would have required Michigan to create and sell an anti-abortion fundraising license plate. But Democrats in the minority opposed the GOP-sponsored measure, making an override attempt useless.

Republican Senate Majority Leader Arlan Meekhof of West Olive considers reversing Snyder on the vehicle tax bill an option. He plans to take the temperature of his caucus when the Legislature returns to session after Labor Day. Any override bid would start in the Senate because they are Senate bills.

“The majority leader doesn’t make a decision in a vacuum. He does have to consider the impact that choosing a veto override would have on his relationship with the governor,” spokeswoman Amber McCann said.

She pointed to Meekhof’s desire to still enact auto insurance changes and a citizens’ initiative repealing a law that requires higher construction wages on government-financed projects. The petition drive, a maneuver that would allow Republican legislators to bypass Snyder if enough voter signatures are collected, was launched by a group of nonunion contractors because Snyder supports the prevailing wage law.

“The majority leader does not go to work hoping to erode his relationship with the governor on a regular basis,” McCann said. “He’s very cognizant of the impact that a veto override would have, but he has to balance that against the desires of his caucus also because he very much views himself as there to help facilitate their will and their desire as their leader.”

On the opposite side of the Capitol, GOP House Speaker Tom Leonard of DeWitt personally supports overriding the veto and plans to discuss it with House members. Votes also would be needed from Democrats, who mostly voted for the bills initially.

“It’s been a priority for me to deliver tax relief to the hard-working taxpayers of this state, and I thought this was a good way of doing that,” Leonard said.

Though overrides are rare — they last occurred in 2002, 1977 and 1951 — he said one should not affect lawmakers’ relationship with Snyder.

“I certainly hope the governor wouldn’t take this personal,” Leonard said. “His prerogative was to veto the legislation and he has that constitutional right. And our prerogative is to override him if we have the numbers. This is nothing that any of us should take personal. It’s a matter of difference on policy.”

Snyder spokeswoman Anna Heaton declined to speculate.

“If they take that direction, we will continue working as partners just as we always have,” she said.

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 would more quickly phase in how much of the trade-in value can be deducted.

The credit now is $3,500 — saving people up to $210 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 would speed the phase-in of the tax break for car purchases to 2029, 10 years sooner. The trade-in credit would jump to $5,000 in 2019 and increase by $1,000 each year after.

The legislation also would fully exempt 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 says the state would 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.

The bills’ supporters include General Motors, auto and RV dealers, bankers and other business groups. Opponents include school districts, local governments and public-sector workers who worry about a further erosion of the tax base.

Bill Sheffer, executive director of the Michigan Association of Recreation Vehicles and Campgrounds, said the group is disappointed with the veto because in-state RV dealerships lose out when people buy in another state to save taxes. He added that a special provision added to the 2013 law benefiting the boating industry has “stuck in our craw.”

“There’s a certain amount of competition for that discretionary recreational dollar, if you will, and we’d like to attract that same customer in many cases,” Sheffer said. Taxing a vehicle without fully accounting for taxes previously paid on a trade-in, he said, is a “double tax.”