A new Bush Administration request to spend $2.325 billion to repair and rebuild highways and bridges damaged by Hurricane Katrina will be paid by the general fund of the U.S. Treasury, according to the Bureau of National Affairs. Under SAFETEA-LU, Congress designated $100 million to be spent each year out of the Highway Trust Fund for emergencies, but clarified that additional emergency spending must be paid with general funds.
Over the past two months, the highway construction industry has lobbied congressional authorizing and appropriating committees and the Bush administration to ensure that the trust fund would not be raided to cover more than its fair share of the cost of relief. The administration’s acceptance of this argument comes at a critical time because highway trust fund spending currently outpaces incoming revenue. Even without additional emergency spending, the cash flow crunch may send the trust fund into debt before SAFETEA-LU expires.
TAX CUT DEAL AGREED ON?
Although no one is quite certain, there seems to be an agreement between the Governor and the House and Senate leadership on a revised tax plan for the State.
Not all of the details are available, but we are providing the highlights on the proposed agreement, as we currently know them. (See the attached information)
Tax Agreement: $97.1 million first year/$1.14 billion over six years (figures below are first year/six year savings)
- Cut single business tax rate to 1.85% from 1.9% in 2009: [Article]/$171.8 million
- Increase sales apportionment factor to 95% from 90% as of January 1 and to 100% January 1, 2009: $16.1 million/$208.3 million
- 15% refundable credit for personal property taxes: $75 million/$675 million
- 100% personal property tax credit in 2006 and 2007 for jobs/equipment brought to the state from elsewhere: [Article]/$50 million
- Reduce gross receipts and excess compensation deductions: [Article]/$73.9 million
- Eliminate over five years of health care costs in taxable base: [Article]/$55.3 million
- Lower taxes for small businesses paying alternative tax: $2 million/$16.2 million
- Small business credit officer pay increase: $2 million/$16.2 million and
- Small business adjusted business income provision: $2 million/$16.2 million.
Where the money comes from: $56.5 million first year/$465.9 million over six years (figures below also are the first year/six-year revenues)
- Eliminate sales tax exemption on prisoner purchases: $500,000/$4.4 million
- Eliminate sales tax exemption on driver education cars: $500,000/$3.4 million
- Eliminate sales/use tax on international phone calls: $10.6 million/$87.7 million
- Eliminate sales tax exemption on insurance companies: $2.3 million/$18.7 million
- Reduce small business credit in single business tax: $3.8 million/$31.3 million
- Ban deduction on subsidiary out-of-state gains: $8.3 million/$69 million
- Restriction on SBT credit/loss carry forward: $3.8 million/$31.2 million
- Higher penalties for tax errors: $3.8 million/$31.3 million
- Doubling liquor fees: $13 million/$78 million and
- Taxes on commercial rental property: $10 million/$110 million.
MITA fought hard to get some personal property tax relief for the industry, but in the end this effort was unsuccessful primarily due to the fact that the legislature was focused solely on saving Michigan manufacturing jobs.
Contact Mike Nystrom, Vice President of Government and Public Relations, with any questions or concerns regarding the above issues.
