Michigan Legislature agrees to hike personal tax exemption, forgive costly driver fees

The House of Representatives and Senate reached a compromise with Gov. Rick Snyder on Wednesday that would eventually give every Michigander a $4,900 personal tax exemption and eliminate costly driver responsibility fees, forgiving $637 million in debt owed by nearly 350,000 drivers.

Without the legislation, the personal exemption, which passed unanimously in the Senate and on a 106-2 vote in the House of Representatives, would have been eliminated because of the Trump administration's federal tax package. The legislature also raised the exemption, which would go from $4,000 to $4,900 over four years. The exemption will result in a savings of more than $100 for a Michigan family — up to $153 when it's fully phased in. 

The House and Senate also unanimously voted to eliminate the driver responsibility fees beginning on Oct. 1. The Secretary of State has set up a help line — 888-767-6424 — and will provide information on the state's website — www.michigan.gov/sos — to help drivers figure out how to get their drivers' licenses reinstated. 

“We’re finally providing real tax relief to the hardworking families of Michigan,” said Rep. Tim Greimel, D-Auburn Hills.

Sen. Arlan Meekhof, R-West Olive, added "When we listen to our taxpayers, they want to improve schools and improve roads and they want money in their pockets and today we delivered that."

Rep. Jeff Noble, R-Plymouth, said lawmakers are doing their jobs and “the money collected through taxes belongs to the people of Michigan, not to politicians and not to the government.”

Snyder had proposed an increase in the exemption over three years to $4,500, while the House bumped it to $4,800 and the Senate to $5,000. The House and Senate had included income tax credits of $100 each for senior citizens and child care costs. Those tax credits were removed in the compromise between Snyder and the Legislature.

Even though he was worried about the impact on the budget — it will cost the state $190 million from the tax exemption and between $35 and $40 million a year from the driver responsibility fees — Snyder said Wednesday afternoon that the bills passed by the Legislature were fiscally responsible to get money back to taxpayers.The driver responsibility fees were particularly controversial because thousands of drivers couldn't get to work without their licenses.

The fees affected 70,000 drivers in Detroit alone, according to Mayor Mike Duggan.

In a statement, Snyder said, "Now that we have acted to reduce the financial burden on taxpayers, we can focus on other important priorities for Michiganders — funding road improvements, more money for education and another responsibly balanced budget finished months ahead of schedule."

The tax cut bills were spawned by the recently approved federal tax cut package, which state officials have said would have created an unintended state tax increase of about $1.5 billion by eliminating the state personal exemption. Lawmakers wanted to return some of that money to taxpayers.

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Driver responsibility fees, ranging from $100 to $2,000, were passed in 2003 to help fill a budget hole when Michigan’s economy faltered. And the money raised — between $99 million and $115 million a year — did help the state’s general fund.

But lawmakers said the fees were a shameful money grab that had nothing to do with trying to make people better drivers. The fees were charged on top of tickets issued to drivers for everything from multiple speeding tickets to drunken driving. Lawmakers passed all the bills unanimously in the House and Senate and the fees will be eliminated and the debt forgiven on Oct. 1.

"Whit this vote, we're getting rid of the last vestiges of a lost decade of money grabbing bills," said Rep. Joseph Bellino, R-Monroe. "These fees have ruined lives."

Speaker of the House Tom Leonard, R-DeWitt Township, said the most important thing about the bills is that they will allow people to get their driver's licenses back, without having to pay the $125 reinstatement fee.

"Right now, I’m going to take this all in and be excited that we delivered tax relief for the citizens of this state and more importantly, giving 300,000 people their driver's licenses back," he said. "We continue to talk about talent development in the state and I can think of no better way to ensure that we are developing talent than making certain that 300,000 people are getting their driver's license back."

Yvonne Rowlett-Watkins of Pontiac burst into tears when she heard the news that the Legislature passed the bills to eliminate and forgive the driver responsibility fees. She has been trying to pay off $6,000 in fees and get her license back since she got two tickets in 2008 and 2009. The state has been garnishing her wages and she has whittled the $6,000 fee to $925, but she still has to scrounge to find rides to work as a fork lift operator for one of the auto companies in Detroit.

"This is what I said last year: God was going to grant my wish to get my driver's license back in 2018," she said. "I knew this would be my year."

Secretary of State Ruth Johnson said the fees did nothing to help driving skills, which was one of the reasons the bills were passed in the first place.

"The automatic fees collected by the Department of Treasury were a terrible mistake," she said in a statement.  "The fees had nothing to do with traffic safety, never should have been adopted, and are now finally on the way out."

The bills would:

• Forgive all outstanding driver responsibility fees when the program is eliminated on Oct. 1, 2018.
• Create an education outreach program to let drivers know how to reinstate their driver's licenses.
• Reinstate a community service program for people who can’t pay off their fines before the program is eliminated.
• Provide immediate forgiveness of outstanding debts to people who have been making a good faith effort to pay off their fines.
• Reinstate the eligibility for driver's licenses to affected drivers when the program is eliminated and waive the $125 reinstatement fee.
• Create a path for drivers to use district court sobriety programs to regain their license.

The cost to the state from both pieces of legislation comes at a time when Snyder has proposed adding $175 million more in state revenues for road improvements and $312 million for an increase in the per-pupil funding allowance for public school students. Snyder presented his budget to lawmakers last week at a level of $56.8 billion.

"We've been working all along, we're going to get rid of driver responsibility fees, invest in education and transportation and we will deliver," Meekhof said. "We will find all the things that we promised."

Contact Kathleen Gray: 313-223-4430, kgray99@freepress.com or on Twitter @michpoligal.

Driver responsibility fees

The Secretary of State will provide information to people on how to get their license reinstated with a help line: 888-767-6424 as well as information on the state's website: www.michigan.gov/sos.