Pro-Prop 5 campaign earns flagrant foul from Truth Squad

MICHIGAN TRUTH SQUAD ANALYSIS: "You Decide", "Collision Course", "Enough Spending" and "Not Rocket Science"

Who: Michigan Alliance for Prosperity, Pro-Proposal 5 group

What: Radio ads

Truth Squad call: Flagrant foul

The radio ads back Proposal 5, a Nov. 6 ballot proposal to add a constitutional amendment requiring a two-thirds vote of the Legislature for any tax increase. Michigan Alliance for Prosperity spent about $1.9 million to put it on the ballot. Most of that money came from Liberty Bell Agency Inc., which lists the same Sterling Heights address as a trucking firm controlled by Manuel "Matty" Moroun, billionaire owner of the Ambassador Bridge. The ads focus on recent tax increases in Michigan as well as a proposal to increase the gas tax.

Questionable statement: "Well, Michigan drivers can get ready for more pain at the pump this holiday season, Gov. Rick Snyder signing into law his tax gas hike giving Michigan the highest taxes on gasoline in the entire nation. Despite widespread public opposition, their measure passed the state House by the narrowest of margins, a single vote."

The "You Decide" ad begins with this news report. It is presented as fact. It is not labeled as a dramatization. Michigan has not passed a gasoline tax increase since the mid-1990s. http://thecenterformichigan.net/gas-prices-make-michigans-road-woes-worse/ No such vote, as reported in this ad, took place and, as a result, no new policy has resulted in Michigan having the highest gasoline taxes in the nation.

In October 2011, Snyder proposed eliminating the 19-cents-per-gallon gas tax and 15-cents-per-gallon diesel tax in favor of a percentage wholesale tax on fuel. For "the sake of discussion," Snyder also posed a state registration fee increase that would raise nearly $1 billion.

Unlike the current fixed taxes, the wholesale tax would rise as the price of gasoline rises. The proposal is aimed at fixing Michigan's roads, rated second worst in the nation in 2010 by Overdrive Magazine. A national transportation research group estimated in 2010 that Detroit's deteriorating roads cost drivers $536 a year. A package of bills to advance the governor's proposal has thus far languished in the Legislature.

According to 2012 analysis by the American Petroleum Institute, Michigan ranked fifth in total tax on gasoline, at 57.8 cents per gallon, and ninth for diesel fuel tax, at 62.3 cents. The totals include the federal tax of 18.4 cents per gallon on gasoline and 24.4 cents per gallon on diesel. The total for gas includes a 6-cent-per-gallon sales tax, most of which is diverted from roads and bridges to the general fund budget.

Questionable statement: "Proposal 5 would make it harder to raise taxes by requiring two-thirds support for the Legislature or a vote of the people for tax hikes."

This is the crux of debate over Proposal 5. Proponents argue that it imposes sensible fiscal restraint on the Legislature at a time when many taxpayers have tightened their own household budgets.

Analysis by the nonpartisan Citizens Research Council found that 17 states have some kind of supermajority requirement for tax increases. The report noted that one study found that such requirements resulted in lower taxes. But it also noted that other research found that they do not necessarily affect total revenue. "In other words, states often increase other taxes, fees and charges to make up for reduced tax collections arising from supermajority vote requirements." The CRC report warned that the two-thirds requirement "could affect Michigan's bond rating, which in turn could affect the state's cost of borrowing."

Analysis by the state House Fiscal Agency noted that passage of Proposal 5 could harm local governments by reducing their revenue stream from the state and forcing them to raise taxes to make up the difference. It also noted that opponents fear that it gives "enormous power" to a one-third minority in either chamber, noting that "as few as 13 (of 38) state senators could impose their will on the rest of the state."

Questionable statement: "John Anthony Smith, born 7:58 a.m., 8 pounds, 15 ounces, $51,585 in debt. It's no secret. Politicians have a spending problem. Michigan government spending has grown faster than personal income or our population, increasing 376 percent since 1960."

This ad opens with the sound of a crying baby, which grows louder with the words, "$51,585 in debt." That is a reference to the total U.S. debt of more than $16 trillion, which breaks down to more than $51,000 per citizen. The ad fails to note there is no direct connection between national debt and state taxation, the focus of Proposal 5.

According to Michigan's Department of Technology, Management and Budget, Michigan's gross budget in 1960 was $1.1 billion, compared to $49 billion for 2013. Adjusted for inflation, that is an increase of about 570 percent, a rise budget officials attribute to the addition of programs like Medicaid, rising health care, welfare and prison costs and infrastructure expenses such as roads, information technology and building construction. But for all that, Michigan ranks about in the middle among states in taxation. According to the Tax Foundation, a Washington D.C.-based tax research group, Michigan ranked No. 22 in per capita state collections in 2010.

According to the U.S. Census, Michigan per capita income was $1,940 in 1959, which would equate to about $14,000 in 2010. State per capita income in 2010 was about $35,000, which represents an increase of about 250 percent over 1960. Population grew from about 7.8 million in 1960 to 9.9 million in 2010, an increase of 26 percent.

The Tax Foundation rated Michigan No. 29 nationally for state and local tax burden per capita in fiscal 2009. For that same year, the Tax Foundation said that 9.7 percent of state income went to state and local tax burden, placing Michigan No. 21.

As recently reported in Bridge Magazine:

"Michigan, in fact, already has a major tax limitation system in the constitution. Commonly known as the 'Headlee Amendment,' the system was enacted by voters in 1978 and includes a prohibition on state taxation in a given year that generates revenue beyond a certain amount established by formula.

"As detailed in a House Fiscal Agency analysis, Michigan hasn’t been near the Headlee revenue cap since 2000. The long-term trend shows state tax collections moving consistently away from the maximum allowed by Headlee."

Questionable statement: "Governor Snyder said it best. 'The role of government is not to be an ATM machine. We are not here to take someone's money and give it out to somebody else.' We couldn't agree more, governor. You mean like when you cut taxes for corporations and raised taxes on middle class families. You even raised taxes on retiree pensions ... Unfortunately, politicians can't be trusted."

The statement includes a sound bite from a Snyder speech as he describes his view of government. In his first year in office, Snyder pushed through elimination of most of the deductions on the income tax, including exemptions for pension income and the Earned Income Tax Credit, as well as a freeze on the rate at 4.25 percent. He also replaced the Michigan Business Tax with a new 6 percent corporate income tax. The package eliminates the tax credit for pension income for some seniors, with the change phased in based on when the retiree was born. It does raise taxes for some middle class families.

Overall impression: For the most part, the ads accurately describe recent tax increases and tax shifts backed by Snyder. The statement about average U.S. per capita debt is accurate, even though there is no direct link between that and the aims of Proposal 5. The assertion that proposed legislation would give Michigan the highest gas taxes in the country is based on assumptions that may or may not come true.

The assertion that "politicians can't be trusted" could cut both ways. Backers of Proposal 5 assume they cannot be trusted to practice fiscal restraint and thus need the restraint the amendment would impose on tax increases. But analysis of both the Citizens Research Council and the House Fiscal Agency warns that the measure could make it more difficult for politicians to deal with a fiscal crisis, thus jeopardizing the state's bond rating.

Foul or no foul: Flagrant Foul. The news report in the "You Decide" ad is a falsehood presented as a real news report. A radio listener could easily misinterpret the ad as fact. This ad is the very definition of irresponsible and false political advertising.

The Center for Michigan (the parent company of Bridge Magazine and the Michigan Truth Squad) has been financially supported by a wide range of corporate and foundation supporters. We are grateful to all funders for helping us create and grow a new nonprofit journalism service for Michigan citizens. Those funders have absolutely no role in the editorial decisions of the Michigan Truth Squad or Bridge Magazine.