Right before Christmas, President Trump signed a Republican tax bill that will raise taxes in Michigan by about $1.5 billion every year.
That’s because the law eliminates the personal exemption, which is $4,000 in Michigan. It’s true that blue states like California and New York have been gouged the most by the plan. That’s by design, as even The Hill declares that red states are using blue states “as their new piggy bank in the GOP Congress.”
But sadly, even newly minted Trump states like Michigan weren’t spared in the tax bill. So that’s left GOP Gov. Rick Snyder and the Republican-controlled Legislature to scramble to fix what the feds have done.
It’s somewhat unusual for Michigan Republicans to try and reverse their Republican brethren in Washington, but it’s a political necessity. The bill has consistently been unpopular, with a majority firmly opposed in several polls. The fact that the Senate rammed it through in the dead of night with handwritten changes scratched in the margins probably didn’t help. (Remember Republicans’ adorable cries of “Read the bill!” during the Obamacare debate?)
Arguing that people aren’t particularly swift and don’t get it probably isn’t a winning argument for the GOP in an election year.
But Republicans — particularly gubernatorial candidates Lt. Gov. Brian Calley and Attorney General Bill Schuette — have to do a lambada-like dance around the fact that their proposals are fixing what Trump has done.
Because if there’s one thing we know about the Trump voters needed to win the August GOP primary, it’s that they don’t take kindly to questioning anything that Dear Leader does. No matter how many times the president erratically speaks, threatens nuclear war over Twitter, or tries to meddle in the federal investigation into his campaign’s ties to Russia, the Trump diehards still support him, as we know from the countless media sojourns into flyover country. (The pro-Trump Michigan Conservative Coalition even deploys a Trump lookalike to cultishly trot around events around the state, which is definitely not weird).
On the surface, the tax fix shouldn’t be hard for Snyder, who refused to endorse Trump. But his No. 1 mission to salvage his badly damaged legacy after the Flint water crisis is to get Calley elected. And nobody is going to win a GOP primary by taking on Trump.
So while proposing his plan to restore the personal exemption in Michigan, Snyder made some references to Congress but has carefully tried to avoid the “T-word.” His treasurer, Nick Khouri, gave an assist by arguing that the exemption elimination was an “unintended consequence” of the GOP tax bill.
Snyder’s proposal is simple and makes some economic sense. But the politics are always trickier, so he’s sweetening the deal by increasing the exemption to $4,500 in 2021. That way, the GOP can bill it as a tax cut. And conveniently, any hit to the state budget will be a problem for the next governor and Legislature to solve.
Meanwhile, Schuette, who has won Trump’s endorsement and has sought to tie himself to the president’s hip, is taking the D.C. tax plan lemon and trying to make lemonade.
The centerpiece of Schuette’s campaign is that he’ll kill the Jennifer Granholm income tax hike. A few quick facts: The Democrat hasn’t been governor since 2010 and the tax increase passed the GOP-led Senate during her tenure. Furthermore, Michigan has had a Republican governor and Legislature for the last seven years. Instead of killing the income tax, they enacted in 2011 a $1.4 billion tax hike on individuals to help pay for an almost $2 billion corporate tax cut.
The Trump tax plan would seem to put Schuette in a bind and undermine his core message. But never underestimate the AG’s political skill.
First, he blithely celebrated Republicans for cutting taxes at the federal level. Then he pivoted by calling for Michigan Republicans to “finally eliminate the Granholm income tax increase.”
It’s a pretty ingenious play. Schuette doesn’t just manage to avoid criticizing Trump and congressional Republicans for their tax hike on Michigan. He actually turns this political liability into an opportunity to return to his campaign message of bashing the Granholm boogeyman. This strategy, of course, ignores objective reality, but Schuette benefits from an environment where many reporters fret that they’ll be accused of bias just for performing the simple act of fact-checking.
Schuette proposes rolling back the state income tax from 4.25 percent to 3.9 percent, which Khouri pointed out would disproportionately favor the wealthy (on top of what the congressional tax bill already did). Naturally, Schuette’s GOP allies in the Legislature think that’s a fine idea.
It seems clear that the tax cleanup debate will devolve into a proxy war between Calley and Schuette. So we can probably expect that politics will trump good policy.
Susan J. Demas is Publisher and Editor of Inside Michigan Politics, a nationally acclaimed, biweekly political newsletter. Her political columns can be found at SusanJDemas.com. Follow her on Twitter here.