Traverse City Record-Eagle

Business

February 7, 2013

Trade-in tax cut possible

Mich. senate votes to cut sales tax for vehicle sales

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LANSING (AP) — Michigan residents would pay a lower sales tax when they trade in cars under legislation overwhelming approved Wednesday by the state Senate as lawmakers seek to jumpstart car sales with a proposal that has stalled in recent years.

"It is a tax cut for Michigan citizens on what is oftentimes the second-largest purchase of their lives," said Sen. Dave Robertson, R-Grand Blanc, the sponsor of the bills.

He said the measure headed to the House would boost sales, especially in border counties. Michigan, where the state sales tax is 6 percent, is among just six states to make vehicle buyers pay sales tax on the full price of a vehicle without subtracting the value of their trade-in, Robertson said.

The measure to collect the so-called "sales tax on the difference" has been backed by Republicans and Democrats in the past, but has stalled over concerns about lost tax revenue.

GOP Gov. Rick Snyder is open to discussing the bills but has concerns, spokeswoman Sara Wurfel said.

"We need to work through the budget before we can begin to look at new tax breaks," Wurfel said.

Similar bills won passage in the House and Senate in 2012 but never reached the governor's desk because of his opposition and because legislators never resolved their differences.

The legislation would apply to the sales of automobiles, watercraft and RVs. A trade-in allowance would be phased in over 10 years for the purchase of cars. Those buying boats and RVs would get the allowance right away if it becomes law.

Senate Appropriations Chairman Roger Kahn, R-Saginaw, was one of two senators to oppose the measure. He criticized it and similar bills as "disgusting" because no details are included on what in the budget would be cut if the tax cuts take effect.

"They are unaccompanied in every instance by a recitation of where the cuts to the budget will be to allow them to give out the goodies," Kahn said.

According to the nonpartisan Senate Fiscal Agency, the legislation would reduce state tax revenue by about $45 million in the next fiscal year, growing each year to total about $227 million in 2022.

Supporters of the bills say Michigan auto dealers are losing business to bordering states that assess taxes on the different between the price and the value of a trade.

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