LANSING -- Senate Republicans voted to increase CEO pay Thursday, but they voted against working families trying to save their homes from foreclosure. They also blew an almost $1 billon hole in the state budget that is already facing a more than $1 billon deficit.
The Senate approved Senate bill 69 by a vote of 23-14, with all the Republicans voting for it. The bill would amend the Michigan Business Tax (MBT) to make it easier to receive a tax credit against the MBT, and it increased the income limits affecting eligibility of CEOs who can get the credit from $180,000 a year to $210,000. It also decreased the number of jobs a company would have to create to be eligible for the credit from 20 jobs to eight.
Democrats said they supported the bill, with the exception of the CEO increase. Sen. Gilda Jacobs, D-Huntington Woods, said she could not support the increase in CEO pay when everyone else is taking a pay cut.
“I am a huge fan of standing up for and supporting small businesses in my district, but I really want to take a closer look at what that $210,000 salary really represents,“ she said. “It is more than four times the annual average wage for police officers and five times what our firefighters make in this state.”
That drew a ridiculous charge from the sponsor of the bill, Sen. Nancy Cassis, R-Novi, that the Democrats were engaging in “class warfare,” and businesses are closing because of the tax.
“I’m not trying to create class warfare by any means; I’m just saying the $180,000 cap is enough,” Jacobs said.
Jacobs introduced an amendment to keep the cap at $180,000, but that was defeated along party lines. Sen. Buzz Thomas, D-Detroit, introduced an amendment that tied barred passage of SB 69 to a recently approved House Bill that placed a 90-day moratorium on foreclosures. That only failed by one vote. But CEO compensation was the big stickler.
“I don’t believe that a business is going to go out of business if we don’t raise this credit another $20,000,” said Sen. Deb Cherry, D-Flint. “I believe that it is the wrong time to be sending a message that CEOs should be paid more.”
With the state facing a budget deficit of more than $1 billion, Senate Republicans continue to increase that deficit with tax breaks, but they refuse and protest any proposed spending cuts. This bill could reduce state revenues by $47 million.
Michael Switalksi, D-Roseville, said it was bad tax policy and a mistake.
“Now people trying to keep their businesses open don’t usually do that by giving themselves a $70,000 raise,” he said. “I don’t really mind people making almost a quarter-million dollars, but I don’t think we need to give them a tax break.”
The Senate also approved SB 191 that will amend the Income Tax Act to increase the household income ceiling for the homestead property tax credit by $10,000; increase the total credit that a taxpayer may claim from $1,200 to $1,300; and allow an additional $50 credit for senior citizens and totally and permanently disabled taxpayers. It will also cost the general fund an estimated $80.6 million. Despite that figure, only Switalksi voted against it.
“We’re asked to provide additional tax relief to people this time with incomes from $73,650 to $83,650,” he said. “I just ask my colleagues, are these the people who are hurting out there?”
The Senate also approved SB 201 that would exempt the purchase of a new car from paying the general 6 percent sales tax on the difference between the new car and a trade in. This has been tried in other states, but both Switalksi and the nonpartisan Senate Fiscal Agency said it has not improved auto sales. It also extended it to boats, campers, heavy earth-moving equipment and snowmobiles. But it will blow a bigger hole in the budget, and the state will lose at least $144 million in lost tax revenue. The School Aid Fund revenue would decline $106.3 million and revenue sharing payments to local governments would decline an estimated $24.2 million.
“People are not buying cars because they are scared about their jobs and can’t get loans,“ Switalksi said. “Falling sales have nothing to do with the sales tax on a car.”
The Senate Republicans continue to deepen the budget deficit. These three bills alone threaten to blow a $1 billon hole in the budget. The Senate Republicans blew another $166 million hole in the budget when they eliminated the MBT with no replacement. They are cutting income, but they are not cutting spending; so in effect they are spending like drunken sailors. As a former drunken sailor, I know what that‘s like.
These decisions are nothing but politics, so Republicans can campaign as tax-cutters. The House will have to be the adults and make the tough decisions and balance the budget. But when you consider that a quarter of the Senate Republican caucus is running for statewide office in 2010.
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