ISSUESFORUM
A' would benefit schools

Wednesday, May 26, 1993- The Michigan Daly Summer Waely -5
'A' is a regressive tax

By GOV. JOHN ENGLER
For 20 years, Michigan property taxes have
soared out of control. The way we fund our
schools isn't fair and just hasn't been working.
That's why Michigan needs Proposal A.
The current system is unfair to our kids and
unfair to taxpayers. It's especially unfair to the
men and women who can't find work because
high property taxes have kept employers from
growing in Michigan and creating jobs.
The time has come to stop talking about the
system and to start making guaranteed, long
lasting changes that benefit all of Michigan.
Proposal A cuts overall property taxes by an
average of more that 20 percent, limits assess-
ment increases and makes the way we fund our
schoolssimplerandmore equitable-allguaran-
teed in the Michigan Constitution.
Proposal A is a real, permanent tax cut -
right now. Guaranteed. Proposal A means fair
school funding - right now. Guaranteed. The
best thing about Proposal A is that it's not a
promise. Proposal A is a guarantee - written in
black and white in the Michigan Constitution.
Support for Proposal A already includes a wide
rangeofschool,businessandcivicorganizations,
including Michigan's largest teacher's unions
and trade associations that employ well over half
of our state's working people.
What is Proposal A?
First, Proposal A rolls back this year's
double-digit assessment increases. Guaranteed.
When you receive your tax bill, it will be just a 3
percent increase - last year's rate of inflation.
No fine print, no exceptions - this is carved in
stone.
Second, no more double-digit assessment
hikes. Proposal A limits all future assessment
hikes to the rate of inflation or 5 percent, which-
ever is less. This safeguard is guaranteed in
specific and unmistakable language, right in the
Michigan Constitution.
Third, Proposal A rolls back maximum
school operating taxes and sets a maximum rate
of 27 mills. Guaranteed. On average, this cut

represents more than 20 percent off your total
property tax bill.
Proposal A makes owning a home more af-
fordable. Even better, it makes it easier for em-
ployers to build new factories in Michigan and
create jobs.
Fourth, Proposal A guarantees in the Con-
stitution a foundation level of support for every
student in every school. Starting at $4,800 per
pupil, this support will grow each year. No mor
Robin Hood plans, no more tax-base sharing, no
more complicated school funding formulas -
Proposal A is simple,easy to understand and fair.
And Fifth, Proposal A guarantees in the
Constitution that 100percent of lottery money is
dedicated to funding our public schools. In sum,
Proposal A creates a school funding system that
works and is fair to the kids and taxpayers.
To pay for these five benefits, Proposal A
includes a two-centhikein the state sales tax to be
devoted to education. This change will bring
Michigan's sales tax up to the national average.
At 6 percent, our sales tax will still be less than
most other industrial states and less than the
average sales tax levied by our Great Lakes
neighbors.
After accounting for the increase in the sales
tax, Proposal A will give taxpayers a net tax cut
of more than $1 billion this year. That's because
you get an entire year of tax relief while paying
the sales tax for less than half the year.
Proposal A means property tax relief and
school finance reform right now. You'll see the
results on your next tax bill and on day one of the
next school year. It's a balanced approach that's
fair and good for Michigan - today and in the
future.
Proposal A isn't perfect, but it's better than
the system we've got now. It puts the interests of
our children first, gives homeowners the break
they deserve and will help Michigan's economy
grow and create jobs. I encourage every citizen
to vote yes on June 2nd, and lei your vote for
reformbe written intotheMichiganConstitution.
Vote yes on Proposal A.

By STATE SEN. LANA POLLACK
By putting Proposal A on theJune2ballot, the
Legislature and Governor have asked the voters
to solve the school finance reform problem.
Although both taxes and school finance need
drastic change, Proposal A would be a step in the
wrong direction. Voters should reject it.
The governor has said that we should not ask
who wins and who loses with Proposal A. When
the details are examined, it is clear why the
governor would rather avoid this question.
Thetaxchanges inProposalA wouldhelpthe
wealthiest individuals and businesses at the ex-
pense of lower and middle income citizens and
renters. The sales tax, which would increase by
fifty percent, is even more regressive than the
property tax. Despite exemptions for food and
prescription drugs, the poorest families pay sales
tax at over twice the rate of the richest. Renters
would pay higher sales tax, but even supporters
of Proposal A admit that it would not reduce
rents.
Becauseofanoddquirk inMichigan's Home-
stead Credit, most low-and middle-income
homeowners would see income tax increases
equal to sixty percent of the gross property tax
savings. For senior citizens, the figure is 100
percent. These families, of course, will still pay
the extra sales tax. The structure of the Home-
stead Credit would prevent income tax increases
for those with incomes over $82,650.
The effects on taxpayers would also vary
depending from school district to school district.
In Ann Arbor, the millage cut would be very
small, resulting in net tax increases of hundreds
of dollars for almost everyone. As in any district,
the poor will be hit the hardest.
The Michigan Department of Treasury has
misled voters with promises of savings in calen-
dar year 1993. Proposal A wouldbe in effect for
half of 1993, but that half year contains a full
year's property tax payments. There are no sav-
ings, only tax increases, in the first half of 1994,
because there are no property tax payments.
Treasury's analyses also omit the fact that the

sales tax is not deductible from federal income
taxes. This would cause $200 million Michigan
dollars to shift to Washington. If trust is a central
issue in this election, the governor's analysts
have clearly failed the test.
Measuring the first 12 months of implemen-
tation, Proposal A would bring a $182million cut
for businesses, paid for by a$352million increase
on individuals. This is because businesses pay a
larger share of the property tax than of the sales
tax, can deduct the sales tax on federal returns,
and suffer no loss under the Homestead Act.
Supporters argue that the "cap" provision is
the most important for taxpayers over the long
run. A provision identical to this one stood alone
as Proposal A on last November's ballot. It was
rejected by over60percent of the voters. It would
create huge disparities in the taxes paid on iden-
tical properties in the same neighborhood.
Proposal A's purported steps toward school
spending equity are also suspect on closer exami-
nation. Many of the neediest districts, especially
in Southeast Michigan, would fare the worst. A
recession would likely cause the much touted
"per-pupil guarantee" to shrink because of de-
clining State revenues.
Moreover, very large inequities between dis-
tricts would remain. Some districts would still
spend nearly twice as much per-pupil as others.
These gapswouldbe guaranteed in the Constitu-
tion.
Abetteroption for bothschoolsandtaxpayers
would be a substantial shift from the property tax
to the state income tax. I will offer such an
alternative if Proposal A fails. Crafted properly,
such a proposal can make Michigan's tax system
much fairer. Most importantly, it can be accom-
plished without a vote of the people.
The public is justifiably desperate for action.
After years of gridlock, some voters may believe
that anything is better than the current system.
Proposal A is not perfect, proponents argue, but
it is the best possible compromise. But Proposal
A is not a reasonable compromise, nor is it the
best we can do. We must demand better.


. Percentage of income spent on items
*subject to Michigan's sales tax:
$10,000..............................................................525%
$20,000 ..............................................................42.8%
$30,000 ..............................................................37%
$40,000 ..............................................................34.1%
$50,000 .............................................................31.6%
$60,000 ..............................................................29.7%
$80,000. .......................................................26.7%
$100,000........................................................24.5%
*Examples of the effect of Proposal A:
Example 1: Family of Four
Household Income: $150,000
State Equalized Value: $125,000
Current Property Taxes: $7915
Total Prop. Taxes (Proposed): $7656
Gross Prop. Tax Savings: .$258.85
Homestead Credit Reduction: $0
Federal Tax Increase: $80.24
Net Property Tax Savings: $171.61
Sales Tax Increase: $735
Net Tax Savings (Increase): $558.39
Tax Change as % of income: 0.37%

Editors' note: On June 2nd, the voters in the state of Michigan will be
asked to vote on Proposal A, which would constitutionall cap prope
taxes, raise the sales tax to6 percent and provide schools in Michigan wit
a minimum amount of per-pupil funding.
Because we believe the outcome of this ballot proposal is pivotal to the
future of the state, we provide you with the opposing views of Gov. John
Engler and State Sen. Lana Pollack. We have also included statistics and
quotes to aid you in your decision.
We encourage you to vote on June 2nd.

Example 2: Family of Four
Household Income: $40,000
State Equalized Value: $50,000
Current Property Taxes: $3166
Property Taxes (Proposed): $3062.46
Gross Prop. Tax Savings: $103.54
Homestead Credit Reduction: $62.12
Federal Tax Increase: $11.60
Net Property Tax Savings: $29.82
Sales Tax Increase: $273
Net Tax Savings (Increase): $243.18
Tax Change as % of income: 0.61%

Examne 3: Family of Four
Household Income: $25,000
State Equalized Value: $30,000
Current Property Taxes: $1899.60
Property Taxes (Proposed): $1837.48
Gross Property Tax Savings: $62.12
Homestead Credit Reduction: $62.12
Federal Tax Increase: $0
Net Property Tax Savings: $0
Sales Tax Increase: $210
Net Tax Savings (Increase): $105
Tax Change as % of income: 0.84%

Proposal A: Impact on Taxpayers
($millions)
Net Property Tax Cut $1,881 $1,907 $1,995
Sales Tax Increase: $816 $1,669 $1,744
Net State Taxpa: $1,064 $237 $251
Increase in Wealth: $15,978 $16,756 $17.7
"While individual circumstances will vary,
there is no doubt that the average Michigan
resident wouldhavemore disposableincomeleft
afterstateandlocal taxesunder 'A' overthenext
few years than without it.
"Two states in the 'tax cut' group, California
andMassachusetts,beganthe decade understudy
with major property tax cuts ...Both states saw
dramatic economic growth following the tax cut.
"In fiscal year 1990, Michigan ranked 10th
among the 50 states with $47.09in property taxes
per $1,000 ofpersonal income. Thenational (50-
state) average was $35.62"
Source: Patrick L. Anderson
Senior Policy Analyst
Mackinac Center-for Public Policy

Source: U.S. Bureau of Labor Statistics, Midwest Consumer Expenditure Survey