It's time for some common sense in our budget process.
Michigan citizens were rightly disgruntled over last year's rancorous budget battle that led to a brief government shutdown Oct. 1. Now, with our economy still weak and revenues being adjusted downward again, two dozen prominent Michigan groups support closing tax loopholes as an alternative to raising taxes or cutting services.
We believe Republicans and Democrats in the House and Senate, along with the governor, are not as far apart as their combative history would suggest, at least when it comes to closing tax loopholes.
Votes in 2005 and 2007 show all but three senators and eight representatives -- none of whom were in office in 2005 -- have supported closing some tax loopholes, although the legislation to close them did not become law.
Starting with the exemptions voted on in 2005 and 2007 and adding Gov. Jennifer Granholm's proposals to close $112 million in loopholes, we find a total of $400 million in previously identified loopholes.
These include a sales tax exemption for pop and candy sold from vending machines. In Michigan, our public policy exempts food and beverage from the sales tax, except for food sold for immediate consumption. Candy and pop, however, are not taxed even though it's hard to believe someone plunking quarters into a vending machine for an icy Pepsi or a Snickers isn't going to immediately consume them. The state forgoes $25 million a year in revenue for this exemption.
Another is the bad debt tobacco tax. Wholesalers are exempted from paying tobacco taxes on tobacco sold to retailers who go out of business or otherwise stiff the wholesalers. The money forgone on that tax loophole alone -- $17.7 million --could add nearly $11 per school child to the foundation allowance.
Michigan also exempts international calls from sales tax. Taxing international calls the same as other long-distance calls would yield $22 million a year -- enough to add more than $13 per school child.
The Michigan Chamber of Commerce says closing a loophole is the same as increasing taxes on businesses. Our coalition of groups, representing education, health, seniors, children and labor, couldn't disagree more. Closing loopholes for special interests does not levy a new tax or increase an existing tax; it simply says one group will no longer be excused from paying. When an exception to a tax is made for one group, the rest of us pay more.
There is no ongoing review to determine if these deductions, credits and exemptions, some decades old, are fulfilling the public purposes for which they were created. We now exempt more than we collect: $32 billion in exemptions compared to $26 billion in state tax revenue.
As longtime former lawmakers we are asking for a sensible budget process. Our budget investments should not be fodder for partisan bickering. Instead, they should be the roadmap to our future with enough support for an excellent education for our children, good services for all citizens and help for the most vulnerable among us.
About the authors: Lynn Jondahl is chair of the Michigan League for Human Services. He served in the House of Representatives as a Democrat from Okemos from 1973 through 1994, and chaired the House Taxation Committee for 12 years. Don Gilmer, who recently retired as Kalamazoo county administrator, is a former House Appropriations Committee chairman and budget director under former Gov. John Engler. A Republican from Augusta, he served in the House from 1977 through 1998.
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