By Derk Wilcox
and Michael D. LaFaive
Michigan Attorney General Dana Nessel published a legal opinion March 28 on whether a legislatively mandated tax cut was permanent or limited to a single year. Allies of Gov. Gretchen Whitmer claimed the 2015 law that created a tax-cut trigger was only meant to reduce the income tax rate for one year. Legal experts and the law's framers argued that the cut was intended to be permanent unless changed by the Michigan legislature and signed by the governor.
Nessel sided with the governor.
During the administration of Gov. Rick Snyder, legislators raised fuel and registration taxes to spend more on Michigan's roads. They also included a future personal income tax cut if revenue growth increased above inflation. That growth materialized, necessitating a promised tax cut estimated to be from 4.25% to approximately 4.05%.
The attorney general's new advisory opinion is the latest effort to overturn that outcome. Attempts were made in the current legislature to thwart the cut from being adopted but those were unsuccessful.
It's important to recognize that an attorney general's advisory opinion is not a controlling precedent. It is not law, and it does not bind the courts. Any interpretation of the law can still be challenged. The courts will respectfully consider the attorney general's opinion, but are not bound by it.
The Michigan Supreme Court recently reminded the legislature in League of Women Voters v. Secretary of State that, "Those formal [Attorney General] opinions, it should be noted, do not bind the courts."
However, even if not binding on the courts, such advisory opinions can be binding on state agencies. In other words, until challenged and ruled on by the courts, the Treasury can proceed to prepare tax tables and regulations as though the tax cut expires in one year.
A challenge in the courts is almost a certainty. When deciding the matter, the courts will interpret a statute as it is plainly written. If there is any ambiguity in the meaning, the courts will look to the legislative history to aid the court in its interpretation. As Mackinac Center Vice President for Legal Affairs Patrick Wright has written: "[Here] the legislative history is clear: The tax rate decrease was meant to be permanent."
The leaders of both chambers who passed the legislation in 2015, along with the governor who signed it, have all issued a release unequivocally stating that their intent in passing it was for the tax cut to be permanent.
State officials have gone to great lengths to deny promised personal income tax relief to Michigan taxpayers, and this is not the first time it has happened. In 2007 Gov. Jennifer Granholm and the Legislature promised personal income tax cuts in exchange for a "temporary" 11.5% personal income tax increase. That promise was never fulfilled, as Republicans later allowed only a 0.1 percentage point rollback before scrapping future cuts altogether.
This year Democrats in the legislature tried to scrap the 2015 promise. They failed to do so, and the legal case for keeping it seems certain. But Nessel's opinion may now need to be settled by court action, a process that could delay the cut's permanence.
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Derk Wilcox is the senior attorney at the Mackinac Center for Public Policy. He joined the Center in June 2012.
Michael LaFaive is the senior director of the Morey Fiscal Policy Initiative for the Mackinac Center for Public Policy, where he has worked since 1995.
