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Mich. Tax Drive Asks For Online Signatures Due To COVID-19

By Paul Williams · March 19, 2020, 7:21 PM EDT

A Michigan campaign seeking signatures for a graduated individual income tax ballot measure made a plea Thursday for lawmakers to allow online signature gathering in light of the social restrictions in place to combat the spread of the novel coronavirus.

The Fair Tax Michigan campaign announced it sent a letter to state House Speaker Lee Chatfield, R-Levering, and Senate Majority Leader Mike Shirkey, R-Clarklake, asking the Legislature to pass a bill permitting petitioners to obtain signatures digitally. The letter came in response to Michigan, like other states, limiting public gatherings to curb the spread of COVID-19.

The public safety measures appear to have left the campaign scrambling for a viable path to the ballot box.

“Due to the impacts of COVID-19, continued face-to-face petition gathering by the multiple ballot initiatives and congressional campaigns in our state is a threat to public health,” said the letter, obtained by Law360. “However, our democracy cannot be compromised as we address this national health crisis.”

The campaign filed a proposed constitutional amendment in February for the Nov. 3 ballot that would ask voters to remove the state constitution’s restriction against a graduated income tax. The measure would require the Legislature in 2021 to replace the state’s 4.25% flat tax rate with a graduated income tax regime.

The tax would be required to raise $1.5 billion more in revenue in fiscal year 2022-2023 than the individual income tax raised in fiscal year 2019-2020. It would also have to reduce the tax rates for individuals and joint filers with annual taxable income of $175,000 or less or $350,000 or less, respectively.

If the state fails to enact a graduated income tax law by June 1, 2021, the measure would require the governor to set the graduated tax rates by Sept. 1, 2021. Either way, the new tax rates would take effect Jan. 1, 2022. The revenue raised by the new income taxes would be split between education and infrastructure funding.

To reach the Nov. 3 ballot, the measure must gather 425,059 signatures by July 6. Eli Isaguirre, the Fair Tax Michigan campaign manager, told Law360 on Thursday that the campaign has not gathered any signatures yet because it must wait for the state Board of Canvassers to approve the summary of the petition, which is expected to happen by early April. 

The onset of COVID-19 has likely made it unsafe for the campaign to conduct the amount of in-person interaction that is usually needed to garner the requisite number of signatures for a ballot measure, Isaguirre said. He said he is hopeful that the Legislature, which is dominated by Republicans who have dashed ideas to increase taxes in recent years, will give the petitioners more flexibility to attain the signatures required.

“We’re hoping that people will leave partisanship at the door with the pandemic,” Isaguirre said. “All we’re asking is for elected officials to do whatever they can so we don’t put democracy on the back burner thanks to this pandemic. We’re looking for every avenue we can.”

Isaguirre wouldn’t commit to saying that the campaign would drop its effort if its request for online signature gathering falls on deaf ears. But a message the campaign sent to volunteers Thursday said that it intends to ask the Legislature to file bills that mirror the petition's language if online signature gathering isn’t offered.

Representatives for the legislative leadership did not respond to requests for comment Thursday.

Without mentioning specifics, Michigan Secretary of State Jocelyn Benson told Law360 on Friday that she believes the state’s ballot initiative process should be modernized in a manner that protects the public’s health while also averting the potential to send every proposal to the ballot box.

“At this time it is critical that we continue to carry out our democracy, and therefore need a safe way to determine if there is sufficient support for ballot initiatives, ”Benson said. “The mechanism should not make it so easy that initiatives are on the ballot that would not have been otherwise, nor should it raise the bar higher than it would have been.”

Graduated income tax proposals have been debated in the state in the past, and were soundly defeated twice at the ballot box in the 1970s. Isaguirre said he believed that more residents would have support for the proposal now in light of the state’s infrastructure funding needs. He added the COVID-19 pandemic has underscored why schools could benefit from an infusion of revenue. Schools are temporarily closed due to the virus, and not all of them could supply their pupils with laptops for remote learning, he said.

If the measure does qualify for the ballot, it’s certain to face fierce resistance from some state business groups and economists.

Dan Papineau, director of tax policy and regulatory affairs for the Michigan Chamber of Commerce, told Law360 that the organization believes that a graduated income tax rate would be “punitive” on entrepreneurs.

“We think a flat tax rate is a fair tax,” Papineau said. “The more money you make, the more money you pay in taxes.”

He added that the petition’s language that permits the governor to unilaterally set tax rates by executive order could create separation of powers concerns.

James Hohman, director of fiscal policy at the Mackinac Center for Public Policy, a free-market think tank, told Law360 on Thursday that he also believes the measure poses a separation of powers issue.

“It may result in giving unilateral authority to the governor to create tax policy,” Hohman said. “That's not how taxes should be determined.”

Hohman said that a graduated income tax could spur a migration of Michigan's high-earners to states with lower tax rates.

A representative for Democratic Gov. Gretchen Whitmer did not respond to a request for comment Thursday.

--Editing by Neil Cohen.

Update: This story has been updated with a comment from the Michigan secretary of state.

For a reprint of this article, please contact reprints@law360.com.

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