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Mich. Graduated Tax Campaign Pulls Measure Due To Virus

By Paul Williams · March 25, 2020, 3:16 PM EDT

A Michigan campaign backing a proposed graduated individual income tax ballot measure announced Wednesday that it would drop its effort to put the question on the November ballot due to the public safety concerns amid the novel coronavirus pandemic.

Fair Tax Michigan said it would suspend its signature-gathering drive to place the measure on the Nov. 3 ballot to comply with the public safety measures that Michigan and many other states have put in place to combat the spread of COVID-19. The campaign will instead set its sights on qualifying the proposal for the 2022 election.

“We plan to continue building our coalition, planning for 2022 and communicating about the need for more funding for education, roads and clean water, and the need for a fair income tax structure in Michigan,” the coalition said in a statement.

The ballot measure would have asked voters to remove the state constitution’s restriction against a graduated income tax and require either the state Legislature or governor to replace the state’s 4.25% flat tax rate with a staggered income tax regime.

The campaign had not collected any signatures for the measure. It was waiting for the state Board of Canvassers to approve the petition’s summary, which was expected by early April.

Last week, the campaign sent a letter to House Speaker Lee Chatfield, R-Levering, and Senate Majority Leader Mike Shirkey, R-Clarklake, asking for legislation that would have permitted online signature gathering. The onset of the virus made it unsafe to conduct the amount of in-person interaction needed to garner the necessary 425,059 signatures by July 6 to qualify for the ballot, the campaign said.

Fair Tax Michigan campaign manager Eli Isaguirre told Law360 that the campaign never heard back from lawmakers directly, but he said that their public statements indicated it was unlikely that they would have offered a bill allowing online signatures to be accepted.

Chatfield spokesman Gideon D'Assandro told Law360 on Wednesday that the speaker didn’t support the campaign’s request because “there are too many questions regarding security and … technology being up to speed in being able to detect fraud with electronic signatures.”

The proposed constitutional amendment would have given the Republican-controlled Legislature the first opportunity to set the graduated income tax rates. If the state failed to enact a graduated income tax law by June 1, 2021, the measure would have required the governor to issue an executive order setting the graduated tax rates by Sept. 1, 2021.

The new income tax rates would have been required to raise $1.5 billion more in revenue in fiscal year 2022-2023 than the income tax raised in fiscal year 2019-2020. At the same time, the measure called for reducing the tax rates for individuals and joint filers with an annual taxable income of $175,000 or less or $350,000 or less, respectively. The revenue raised by the new income taxes would have been split between education and infrastructure funding.

According to the campaign, the measure would have cut taxes for more than 90% of Michigan residents and would ask certain high-earners to pay “a bit more” to address the state’s need for more education and infrastructure revenue. However, the proposal’s opponents said it posed separation of powers issues and would have created a greater disparity in taxes paid by low-earners and high-earners than the state’s current flat tax rate.

The proposal’s allowance for the governor to set the tax rates appeared to be a backstop to ensure that Republicans in the Legislature, who have dashed ideas to increase taxes in recent years, couldn’t stall in doing away with the state’s flat income tax rate. Democratic Gov. Gretchen Whitmer, who is in her first term, will be up for reelection in 2022.

When asked if the potential for a new governor to be elected in 2022 could alter the petition’s ballot language, Isaguirre told Law360 that the election was too far away to predict any possible changes to the proposal. However, he indicated that the measure’s specifics could be revisited.

“We have not set anything in stone at this point,” Isaguirre said.

Shirkey’s office did not respond to a request for comment Wednesday.

--Editing by Neil Cohen.

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

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