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Oct
2011
5

Flip-Flop Tax: MI Gov Rick Snyder Revokes Tax Incentive For Low-Income Earners

Michigan Governor Rick Snyder has made some new enemies in Muskegon among those who moved in to the area based on tax incentives created by former Gov. Jennifer Granholm. The breaks allowed certain developing areas of the city to be virtually tax free until 2014. Now, Snyder’s overhaul of the Michigan tax system will force them to start paying taxes on January 1st, 2012 something the mostly middle class residents were not prepared for. For people living in the Renaissance Zones and earning $25,000 a year this means coming up with an extra $1,000 starting at the beginning of 2012. For those lucky enough to earn $150,000, the eradicated breaks will add $3,400 to their tax load.

The problem here is that the program was working. Bob Brady, president and part owner of GMI Composites in Roosevelt Park, told MLive.com of the state’s decision to renege,

“That’s not pretty,” Brady said when hearing of the Ren income tax changes. “That will guarantee in a place like Muskegon that those kind of residential developments will not be happening. That was a big gun and to lose it is a bitter pill.”

Brady was the first buyer of one of 53 condominium units in the WaterMark Center, formerly the Shaw-Walker office furniture factory. His wife Cindy Brady sits on the WaterMark Center condo owner’s association board. Brady, a lawyer in Muskegon, also added that, “the sudden change of policy doesn’t give income taxpayers in Ren Zones (as they’re called for short) time to adjust their financial circumstances to deal with the new tax liability.

According to the City of Muskegon’s website,

“Michigan’s tax-free Renaissance Zones are areas designated as virtually tax free for any business or resident presently in, or moving into, a zone. They are designed to provide selected communities with the most powerful market-based incentive-no taxes-to spur new jobs and investment.”

It seems as if Michigan lawmakers were unaware of the abolition of low-tax Ren Zones in the tax overhaul. Some, such as Rep. Holly Hughes, have vowed to fight to get the Ren Zones back into place via the legal system. According to Hughes,

“We are going to try to get that exemption back. We are not happy about the change, but the governor is not with us on this. We’ll live to fight another day on this.”

Freshman Democratic Legislator Marcia Hovey Wright has also argued this point.

“It’s a violation of a state promise. This tax change provision was never brought out in the debate. Many legislators and even the lieutenant governor (Brian Calley) were unaware of it.”

If this is true it seems as if the fault should lie with these legislators who obviously did not study the finer details of the massive tax overhaul. There is an alternative explanation, though: they are just plain lying.

The political infighting, of course, provides no relief for those who moved into these impoverished areas and acted as the first residents of its rebirth. It will also hurt those who decided to invest in building apartments and condos in the Renaissance Zones.

According to Sara Rooks project manager of WaterMark Center developers:

“The RenZone income tax changes are a big blow for future sales. Of the 53 initial units in the development, 20 have been sold but nearly all are occupied through rentals.”

“These incentives are absolutely key,” Rooks said of the Ren Zone tax breaks. “People made decisions based upon that provision and invested in downtown Muskegon. Everyone through our doors first asks about the Ren Zone.”

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