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More posturing than substance on budget

19 March -- The posturing is well under way before the three-way budget negotiations begin. Last Friday, when Gov. Granholm returned from Europe, Senate Majority Leader Mike Bishop (R-Rochester) had insisted that they meet in person, Granholm initially said she could not, but by the time she had opened her schedule Bishop was committed elsewhere. Today, with members of her administration and Senate Democratic leaders in attendance, the Governor told reporters that Sen. Bishop had not shown up for a scheduled meeting and had sent no one to speak for him. (Bishop's office insists that the Governor had been told in advance that he could not attend.) All parties have agreed, in theory, to actually meet Tuesday. In the meantime, a statewide poll by Lansing-based EPIC-MRA indicates that a majority of Michiganders opposes the Governor's 2% excise tax on services, with 56% opposing the measure and 39% supporting it. (A poll conducted for the DetroitFree Press reports similar numbers.) More than half of respondents agreed that the Governor needed to make more budget cuts and spending reforms in the budget, while about one quarter thought that enough cuts had already been proposed. The vast majority of those responding in both polls were, however, very willing to see an increase in the "sin taxes" on alcohol and tobacco. Alternatives to the services tax, such as an increase in the income tax, or applying a lower sales tax rate on both goods and services, also got little support. At the same time, however, the Free Press poll found that a substantial majority of respondents favor spending on health-care for low income workers and to support universities. These kinds of contradictory views, opposing taxes but supporting state services, has helped to create the schism we see in the state legislature. Finally, House Republicans responded to the Democrats' proposal to temporarily limit increases in the taxable value of homes with a new measure which would prevent assessments from rising when property values are falling. One of the changes made by Proposal A in 1994 was to separate the taxable value of "homestead" property from the government's estimate of its market value (SEV). Taxable value was only allowed to rise by the lesser of 5% or the national rate of inflation in any one year, regardless of what happened to property values. As a result, the taxable value of homes statewide significantly lags overall SEV, limiting tax revenues. Recently, however, some homeowners in areas with declining market values still saw their taxes rise as their taxable value increased by the allowed 3.7%, catching up a little to SEV. The Republican plan would prevent taxable values from rising when market values were falling. It would also dampen the so-called "pop-up" tax by limiting how much taxable values could rise when a property changes hands. Under current law, taxable value "pops up" to equal SEV when a property is sold. Republican lawmakers insist that their plan is superior because it offers permanent tax relief, in contrast to the Democratic plan. The Democrats' plan, however is connected with other measures to mitigate the loss of tax revenue to local governments, while there is no similar component to the Republican plan. No one was discussing the impact on revenues earmarked for school aid, which would suffer under either proposal. For more on the Free Press poll, see: http://www.freep.com/apps/pbcs.dll/article?AID=/20070318/NEWS06/30317000...
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