Susan J. Demas: Trump Taxes and Tariffs Squeeze Michigan GOP in 2018

If President Obama had socked Michigan with a one-two punch of higher taxes and steel tariffs, Republicans would be licking their chops about 2018.

The GOP playbook of running against a tax-’n’-spend liberal president who just knifed the domestic auto industry practically writes itself.

But it’s actually a Republican president — the first to win Michigan in three decades — who’s pushed this rather bizarre economic agenda.

Last week, President Trump angrily announced tariffs on steel and aluminum, shocking many conservatives and ultimately leading to the resignation of economic adviser Gary Cohn.

We’ve seen this movie before. When President George W. Bush tried steel tariffs in 2002, every state lost jobs. That confirmed for most fiscal conservatives that protectionism, even in small doses, is a bust. As the home of GM and Ford, Michigan was one of the hardest hit, shedding almost 10,000 jobs.

The leading GOP candidates for governor are both running hard on the economy. Lt. Gov. Brian Calley is selling himself as the right person to continue the “Michigan’s comeback” since the Great Recession. And Attorney General Bill Schuette is pitching a “Paycheck Agenda.”

Trump’s tariffs could sour both their plans, but so far, Schuette and Calley have been awfully quiet about this.

The auto industry is far from the only one that will be affected. Aluminum tariffs will squeeze beer and soft drink makers, particularly smaller craft brewers, many of which make their home in Michigan.

If you think this isn’t going to be a big deal here, consider the fact that Michigan’s beer tax hasn’t been raised in more than 50 years. And any time a politician proposes doing so, the idea dies within days, if not hours.

While soda taxes have gained some currency in cities as a way to combat obesity, good luck making that case in Michigan. Last year, Gov. Rick Snyder signed a law banning local governments from taxing pop (even though Republicans supposedly love local control, at least when it’s ideologically convenient).

Naturally, other countries quickly vowed to retaliate against the United States. The European Union wants to raise tariffs on bourbon, which basically means anything you try to drown your financial sorrows in will end up costing you more now.

But no worries. Trump tweeted that “trade wars are good, and easy to win,” demonstrating, once again, his grade-school-level grasp of economic policy.

At least when Bush started his ill-conceived trade war, it was after he signed a tax law giving almost every American a tax rebate.

Trump has taken a different tack. The 2017 tax law does achieve the Republican Party’s greatest priority, slashing taxes for the rich and big corporations. But its tax relief for middle-class and lower-income families is modest at best. The law also eliminates some big deductions so many will actually owe more to the IRS.

One of those deductions is the personal exemption, which is $4,000 in Michigan. That amounts to a pretty hefty tax increase, so the Michigan Legislature and Gov. Rick Snyder scrambled to restore and increase it over time, so the GOP could run on a tax cut.  

Republicans were careful not to criticize the president or GOP-controlled Congress, just as they would have done if Democrats were in charge (snort).

I mean, Schuette is still running against Jennifer Granholm as the Ghost of Tax Hikes Past, even though she hasn’t been in charge since 2010 and had GOP help in passing the ‘07 income tax increase.

And because Schuette keeps pushing this misleading narrative, I’m going to keep pointing out that Republicans have been in complete control of Michigan’s government for more than seven years. Instead of killing the income tax, they enacted in 2011 a $1.4 billion tax hike on individuals to help pay for an almost $2 billion corporate tax cut.

Between taxes and tariffs, Trump hasn’t done the GOP any favors in the 2018 election in Michigan.

But if worse comes to worse, they can always go back to the tried-and-true tactic of blaming Obama. And remember, anyone who points out actual facts to the contrary is just peddling “fake news.”

Susan J. Demas is Publisher and Editor of Inside Michigan Politics, a nationally acclaimed, biweekly political newsletter. Her political columns can be found at SusanJDemas.com. Follow her on Twitter here.

Susan J. Demas: Can Michigan Democrats Rebound as Trump Abandons Economic Populism?

On the campaign trail, Donald Trump often told adoring crowds that the “system is rigged” and “I alone can fix it.”

He stumped as a different kind of Republican, with a blend of nativism and populism that helped him crack the Upper Midwest code and win the presidency. Afterward, Stephen Moore, a once-staunch economic conservative who founded the Club for Growth, shocked many by declaring that the GOP is a “populist worker-class party now.”

U.S. Rep. Debbie Dingell (D-Dearborn), who warned early on that Trump could win Michigan, told Inside Michigan Politics that he tapped into working-class fears about free trade and spiraling retirement costs. She spends countless hours at town halls and community events in her district — which spans Dearborn, Ann Arbor and Downriver — and says the anger and anxiety is still there.

“The American people are worried about their lives. They’re worried about their jobs. They’re worried about the safety of their neighborhoods, about whether they can go to the doctor,” she said in an interview last month.

Since becoming president, Trump has gone all-in on the nativist part of the equation. He’s tried to institute his “Muslim ban,” proposed severe limits for legal immigration, threatened to shut down the government this month if he doesn’t get money for his wall with Mexico, and has been widely criticized for failing to condemn white supremacist violence.

But Trump has offered precious little economic populism — which is what many pundits would at least like to believe is how he won Rust Belt states like Michigan, Wisconsin and Pennsylvania.

Instead of kicking off his agenda with a big infrastructure package — which probably would have attracted Democratic support — Trump went all-in on repealing Obamacare. And House Speaker Paul Ryan (R-Wis.) and Senate Majority Leader Mitch McConnell (R-Ky.) cut Dems out of the process, seeking a complete GOP victory.

As of now, health care repeal is dead and the president remains livid, periodically tweeting slams of McConnell.

Trump is now trying to pivot to his tax plan, which he announced at Missouri campaign-style rally this week (interesting timing, as Hurricane Harvey continues to batter Texas).

His rhetoric may still be populist, but his plan — at least what we know about — looks awfully similar to what Republicans have been proposing for the last 30 years. Trump wants to cut the corporate tax rate and the rate for the top income bracket.

And many working-class families would see a tax increase, as Trump wants to end the head-of-household deduction for single parents. That sounds a lot more like religious right-inspired social engineering than blue-collar economic populism.

Trump’s abandonment of populism and dismal approval ratings could create an opening in 2018 for Democrats, if fissures between the far-left Bernie Sanders faction and mainstream Dems don’t doom the party, as they did in 2016.

As for Dingell, she believes Democrats also have to “take control of the trade issue,” which is particularly important for Michigan, home of the domestic auto industry. She’s not sure what will come out of Trump’s promises to renegotiate NAFTA.

“I said to him from the very beginning: ‘Mr. President, if there’s something that will help the working men and women in my district, I’ll work with you. And if you’re going to do anything to hurt ‘em, I’m going to fight you tooth and nail,’” Dingell told IMP.

So far, Trump hasn’t offered much to help working-class folks in Dingell’s district or any other and polling shows their patience is wearing thin. It would certainly be ironic if the very voters who pushed Trump over the top in ‘16 ended up costing Republicans big-time in 2018.

Susan J. Demas is Publisher and Editor of Inside Michigan Politics, a nationally acclaimed, biweekly political newsletter. Her political columns can be found at SusanJDemas.com. Follow her on Twitter here.

Susan J. Demas: The Income Tax Cut Could Come Roaring Back

The dramatic collapse of the Michigan income tax cut last month really was something to behold.

In their first big policy push of the new term, the House Republican leadership announced what looked like a surefire winner to (gradually) scrap the state’s income tax, a longtime priority of groups like the Mackinac Center for Public Policy and Americans for Prosperity.

Conservative bitterness over the tax rate stems from the 2007 government shutdown when the state was staring down an almost $2 billion deficit. Then-Senate Majority Leader Mike Bishop (R-Rochester), who’s now a congressman, agreed to a deal with Gov. Jennifer Granholm to temporarily up the 3.9-percent income tax rate to 4.35 percent.

The tax rate was supposed to roll back, but it never fully did. That’s because in his first year in office in 2011, Gov. Rick Snyder had bigger plans for the tax code. He wanted to cut business taxes by $2 billion a year. One of the ways he paid for that was to keep the income tax at 4.35 percent for the first year and then freeze it at 4.25 percent thereafter.

That was a hard pill for the Republican right flank to swallow.

So to kick off 2017, new House Speaker Tom Leonard (R-DeWitt) and his team hatched their plan to whittle down the income tax to nothing over the course of 40 years. This had the added benefit of giving the GOP something to run on in 2018, which they know could be a rough Republican year if President Trump’s approval ratings keep dropping.

Their messaging was simple and effective for voters.

“This is the people’s money, not ours,” Leonard declared in a January press release announcing the plan.

But things quickly skidded downhill from there. Snyder let his displeasure over the tax cut be known. Senate Majority Leader Arlan Meekhof (R-West Olive) wasn’t exactly enthusiastic, either.

It soon became clear that a majority in the lower chamber wouldn’t sign off on killing the tax completely, so it was retooled as a partial rollback.

However, that didn’t solve the huge stumbling block of the first-year $1.1 billion sock to the budget, which several Republicans worried would hit education and infrastructure particularly hard. And future tax projections are running so red that they look like they’re ripped out of a horror movie.

Republicans have controlled everything in Michigan state government for the last six years. But as all comic book geeks know, with great power also comes great responsibility. And that means that it’s completely on the GOP to balance the state’s $55 billion budget (unlike the feds, we can’t run a deficit).

Chopping more than $1 billion from the budget would probably mean worse schools and roads (which voters probably wouldn’t understand after being slapped with huge gas tax and fee hikes). So 12 Republican representatives refused to walk the plank, which torpedoed the bill during a late-night session, a rarity this early on in the year.

Leonard took his share of slings and arrows for putting up the bill without having the votes. But it’s doubtful that too many voters will remember that rookie move when 2018 rolls around. (I took a lot of grief from politicos when I wrote that the Todd Courser-Cindy Gamrat sex scandal would have zero impact on the 2016 election. But I turned out to be correct, as nobody cared once Trump barrelled onto the political stage).

Leonard is also doing a juggling act between leading his caucus and looking ahead to next year when he’s term-limited. He’s interested in running for attorney general, which means he has to be nominated at the state GOP convention that’s dominated by conservative activists. Needless to say, the speaker’s hard line on taxes will be wildly popular with them.

And despite this initial setback, I don’t believe the income tax cut is dead this term. Some may be being lulled into a false sense of security.

Don’t forget that Sen. Jack Brandenburg (R-Harrison Twp.) has been working on his own plan. This isn’t a new cause for the Macomb County small businessman, who was a vocal “no” vote in the House during the ‘07 increase. Anyone who knows Brandenburg knows he’s never going to give up.

And consider this scenario. Let’s say that a Democrat is elected governor in 2018, which even many Republicans acknowledge is a decent possibility.

It’s easy to see the GOP-controlled Legislature mustering up enough votes in lame duck to slash the income tax. That way, they can brag to their constituents in the next election that they fought to put more money in their pockets.

And the best part is they can stick the next governor with the bill.

Let the Democrat how to figure out how to pay for their tax cut. If s/he struggles to do so, Republicans can argue it’s clearly a case of liberal economic incompetence (like we got from Granholm for eight years). And if the new governor wants to get rid of the tax cut, s/he’s a typical liberal tax hiker.

Sure, that would all be wildly fiscally irresponsible. But why let good policy get in the way of good politics?

Susan J. Demas is Publisher and Editor of Inside Michigan Politics, a nationally acclaimed, biweekly political newsletter. Her political columns can be found at SusanJDemas.com. Follow her on Twitter here.

Susan J. Demas: A tale of two governors: Jennifer Granholm got the blame, Rick Snyder gets none

Let's say that as governor, Jennifer Granholm had pushed a massive tax increase and voters killed it by a 4-1 margin.

Do you think she would have gotten the blame? 

Would newspapers have editorialized that it was a failure of her leadership? Would political observers blame her team for the poor messaging? Would there be jokes circulating around the Capitol that that's what happens when you put a woman in charge?

Of course. And aside from the sexist cracks, I would have been right there with them (Folks with long memories may recall I wasn't Granholm's biggest fan).

Read more.

Susan J. Demas: Proposal 1 could fail because voters don't trust government to fix our roads

When people vote "no" on Proposal 1 in a few short weeks -- and right now, that looks to be a healthy majority -- it won't be because most of them think our roads are great.

That's why the lack of support is so perplexing to editorial writers, Lansing insiders and politicians backing the plan. For them, it's all pretty simple:

If you think Michigan's roads are terrible, you must vote "yes."

But plenty of voters don't see it that way. There are a dizzying number of reasons why people are against this proposal, many of them contradictory. 

Read more.