Senate Finance Considers Harmful Acceleration of “Tax on the Difference” Elimination

Posted on February 12, 2014 by Dene Westbrook

This afternoon the Senate Finance Committee considered Senate Bills 754 and 755,  legislation that would accelerate the would amend the Use Tax Act and the General Sales Tax Act, respectively, to accelerate the schedule that excludes from taxation the value of a motor vehicle or recreational vehicle (RV) traded in for a new or used vehicle or RV; the bills would double the annual increase in the maximum dollar amount that may be excluded, and provide for no limit beginning in 2025, rather than 2039.

According to the non-partisan Senate Fiscal Agency, the bills would reduce State and local unit revenue through fiscal year (FY) 2037-38. In FY 2014-15, the bills would reduce State revenue by approximately $23.9 million, including a $19.5 million reduction to School Aid Fund revenue, a $1.2 million reduction in Comprehensive Transportation Fund revenue, and a $3.2 million reduction to General Fund revenue; and would lower local unit revenue by $2.7 million through reduced constitutional revenue sharing payments. Total State and local unit revenue losses would increase to $32.5 million in FY 2015-16 and $38.4 million in FY 2016-17. After FY 2024-25, the revenue losses relative to current law would begin declining, reaching zero in FY 2038-39.

Please contact your legislators and ask them to vote no this legislation that is harmful to local funding.

Samantha Harkins is the Director of State Affairs for the Michigan Municipal League.  She can be reached at 517-908-0306 or email at [email protected]

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