Political roundup: Income tax cuts, and why Michigan needs a hefty "rainy day" fund

Feb 10, 2017

Michigan Governor Rick Snyder released his budget proposal this week, and there's a lot of discussion about how the state's money will be spent, or not spent, in the upcoming year. 

Ken Sikkema, senior policy fellow at Public Sector Consultants and a former Republican legislative leader, along with Vicki Barnett, the former mayor of Farmington Hills and a former Democratic legislator, joined Stateside to break down the governor's budget

The budget is considered a common-sense proposal by many political insiders, with some modest increases for schools and infrastructure. But Snyder wants to put $260 million into the budget stabilization fund, or as many call it, the "rainy day fund.” That will bring the fund up to about $1 billion.

Between infrastructure and Flint, there's no shortage of expensive items on the to-do list for the state government. So why is contributing to the rainy day fund a good idea?

"A rainy day fund signals to bond issuers that you have a healthy economy, and it lowers your interest rate," said Barnett, who used to work as a financial planner. "When it lowers your interest rate, it affects every project you're going to go bond for, including roads. So it actually saves us money in the long run to have money in our savings account."

Some Republicans, like Rep. Laura Cox, who joined Stateside earlier this week, want to gradually eliminate the state's income tax. At this point, there is no public plan on how to pay for it. Sikkema sees this as an easy way to score political points today, though it could be a potential long-term problem.

"It's pretty easy for one legislature to put in an income tax phase-out and then force a future legislature to deal with the spending cuts that are a consequence," Sikkema said.

Listen to the full interview above. It includes more about the governor's budget, how other states have dealt with having no income tax, and why Barnett doesn't think we can cut enough to pay for the loss of revenue.

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