Who'd of thunk?-----Road plan costs taxpayers $410M in lost deductions

Road plan costs taxpayers $410M in lost deductions

Lansing — The $1.2 billion road-funding plan endorsed by Gov. Rick Snyder may leave a $102 million pothole in the pockets of as many as 1.2 million Michigan taxpayers who deduct vehicle registration fees on their federal income taxes.

Economist Patrick Anderson's East Lansing-based firm says the "far reaching and complicated" road funding package lawmakers slapped together on the last day of December's lame-duck session will likely cause federal income tax bills to rise.

That's because lawmakers changed the tax on vehicle registrations from an ad valorem property tax to a "straightforward excise tax," the Anderson Economic Group said in a report published Wednesday.

But the federal tax code only allows taxpayers to deduct vehicle registration taxes if it was property tax, meaning taxable income of Michiganians will likely rise if voters approve the road funding package in May, Anderson said.

The economist said the change in law could result in $410 million in fewer deductions for up to 1.2 million Michigan taxpayers, increasing federal income tax bills in the state by $102 million annually. The change will likely hit two-income families the hardest, he said.

"If you drive your car home and park it in your garage, this almost certainly affects you," Anderson told The Detroit News on Wednesday. "If you own two cars in your household, this probably affects you. The property tax deduction is more popular than the mortgage interest deduction."

....A package of bills designed to generate $1.2 billion more annually for roads by 2017 hinges on voters approving an increase in the sales tax from 6 percent to 7 percent on May 5.

Passage of Proposal 1 will trigger a series of new laws to go into effect, including House Bill 4630, which eliminated the depreciation schedule for new vehicles and changed the registration fee to an excise tax....