(WXYZ) - A day after presenting his budget to the state legislature, Michigan Governor Rick Snyder sat down with Action News anchor Stephen Clark for a wide ranging interview.
The governor started out by talking about the controversy his budget proposal has raised, including a tax on pensions and cutting the Michigan Business tax.
“It’s part of the job and the things I talked about yesterday are things I talked about on the campaign trail,” Snyder says. “I knew coming into this job that it wouldn’t be an easy job, but the main thing that keeps me going is it’s about doing the right thing and it’s the right thing for the citizens of our state.”
One of the big criticisms of the budget has been that to many it appears as if businesses are getting a big break while tax payers are expected to shoulder a burden.
Snyder says that’s not the case. “If you think about the business side of things, a couple of things are going on where I don’t think that’s really true. If you look at it, we get rid of the MBT and then create this 6% corporate net income tax. Well let me talk about who’s not a corporation, which are most of our businesses. They’re sole proprietorships. They’re partnerships. What tax have they been paying? These are the people who have been paying their business income on their personal tax return.”
Snyder says with many businesses also paying the Michigan Business Tax, they have been paying beyond their fair share. “Is that fair that we’re asking these business people to pay over 10% of their income to the state while the rest of us are paying 4% or so,” Snyder asks.
Snyder also says getting rid of many of Michigan’s tax credits will clear the state government’s books.
“If you look at it, the liabilities that we’ve taken on, just the credits outstanding through 2015 are over $2 billion. We have credits that we’ve issued as a state that run through 2032. So basically we were giving out money and playing this kick-the-can down the road attitude of saying ‘Here are future obligations that someone’s going to have to pay for.’ Well, I’m drawing a line. It’s time that we take responsibility for those past obligations.”
He says, “Let’s step up and take the responsibility and be fiscally sound and responsible and build a budget to say ‘Now we’ve got a system that works in total.’”
One group that has been critical of the budget has been AARP of Michigan which has compared it to declaring war on the elderly.
Snyder says, “There’s no war on the elderly, our seniors are great people. One of the most important things that we did when we did the personal income tax piece is we made sure that we were taking care of things like Social Security, which is excluded from the Michigan Income Tax. We go beyond the federal law to exclude all of Social Security from the Michigan Income Tax. That’s one of the few exclusions that we kept and want to make absolute sure is there.”
Snyder says he doesn’t want to minimize the pain people will be feeling by having to pay taxes on pension, acknowledging that it will be a burden. He says that based on what most people are receiving, if they are filing as a couple, they will not have to pay a cent of Michigan Income Tax until they make more than $40,000.
He also says that those who are criticizing the plan are not taking into account that many seniors don’t have a pension, and that, as we move forward, the number of seniors who are receiving a pension will further decline.
He says, “We are just creating a level playing field to treat people in the same way.”
As for concerns that this will hit people who, because of their pensions, are living on a fixed income, Snyder says that doesn’t take into account that inflation and the increase it causes in the cost of living has flattened out.
“We still have some cost of living increases, but it’s moderated a lot and in a number of cases they have escalator [to make up for the increase],” Snyder says.
Another area where the budget has received much criticism is over sharing revenue with the cities. For instance, Detroit Mayor Dave Bing has said that cutting the revenue sharing threatens the progress Detroit has made in recovering from the recession that has hammered the entire country, but Michigan in particular.
Snyder says that while it will be a challenge, he feels that his approach will cause the least amount of pain.
“This is one of those fundamental changes that we need to do in our government,” he says. “It shouldn’t be just about giving people money, it’s about setting a standard of performance that’s appropriate. So we’re setting a best practice incentive and these incentives are things we’re willing to do at the state level ourselves. We’re not going to ask them to do anything that we’re not doing.”
In order to meet those best practice incentives, the cities must meet conditions that fall into three categories. The first is accountability and transparency, the second involves employee compensation issues, and the third involves issues