The Michigan House passed a sweeping property tax reform package Wednesday night. The eight-bill proposal would eliminate roughly $5 billion in state tax revenue. The man who drove it is Matt Hall, the Republican Speaker of the House from Richland Township.

The vote was largely party-line. The bills now move to the Democratic-led Senate, where they face an uncertain path. Governor Gretchen Whitmer would also need to sign them into law.

What the package would change

The legislation eliminates several taxes that affect Michigan homeowners and businesses. According to CBS Detroit, the package would:

  • Eliminate the 6-mill state property tax
  • Repeal the 0.75 percent real estate transfer tax
  • Remove the "pop-up tax" that reassesses property at market value after a sale
  • Expand personal property tax exemptions, including for public utilities
  • Require utilities to pass savings through rate reductions and freeze rate increases for two years

"We hear so much about property tax, and how the cost, you know, property tax has really made it difficult for people to continue to live in their homes," Hall said at a press conference Wednesday night. "We see how the pop-up tax has made it harder to buy and sell homes."

State Rep. Jamie Thompson, R-Brownstown Township, told CBS Detroit that the average homeowner would save about $1,400 a year under the plan. Hall himself told reporters the savings would be closer to $1,200 annually for the average Michigander, according to WZZM13.

The $5 billion hole

The nonpartisan House Fiscal Agency estimates the package would cost state and local governments billions. More than $3 billion would come from the Student Aid Fund, which finances public education, according to WZZM13.

"Any savings that every day Michiganders will feel with this tax cut are not going far when they're going to have to pay more for their car repairs because our roads are falling apart, when they have to pay for higher home insurances because we've defunded public safety services, and when you're going to have to pay for higher tutors for your kids because our classes are underfunded," said State Rep. Stephen Wooden, D-Grand Rapids, according to WEMU.

All but one Democrat voted against each of the bills. The lone Democratic yes vote came from State Rep. Karen Whitsett, D-Detroit, who said the cuts could help attract homeowners to her city.

"We're trying to move people into Detroit, we want more people there, we want to have more people who are homeowners," Whitsett said alongside Hall at the press conference, according to WEMU.

The missing piece: House Bill 5880

The property tax cuts are tied to House Bill 5880, a separate bill that would impose an excise tax on certain services to replace the lost revenue. That bill has not yet been voted on by the full House.

Hall has described the service tax as a "luxury tax" targeting lobbying, telemarketing, limousine services, and private jets. The House Fiscal Agency has not yet analyzed HB 5880, so the estimated revenue it would generate is unknown.

"If we were to tax all services we estimated it'd be $18 billion, okay, the proposal we moved today I consider to be a $5 billion proposal," Hall said. "But I feel more confident if we kind of compared notes with the Treasury Department and came to a consensus to ensure that there's consensus that it's revenue neutral."

The Michigan Chamber of Commerce raised concerns about the proposal in a May 21 report. The chamber said any service tax must exempt business-to-business services to avoid "tax pyramiding," where taxes compound throughout the supply chain and raise costs for businesses and consumers.

Wooden questioned whether a luxury service tax could ever fill the gap.

"The only way we're going to expand our sales tax on services in a way that fills a $5 billion hole is if we start taxing services that aren't luxuries," Wooden told WEMU.

What happens next

House Bills 5873 through 5879 are tied to HB 5880. The property tax cuts cannot take effect unless the service tax bill is also signed into law. The bills now go to the Senate for consideration.

Hall said he plans to submit a smaller state budget this year than last.

"We're not proposing tax increases that bring more revenue in that'll make this budget bigger than last year," Hall said. "Our goal is to make this budget smaller than last year, just like we did this past year."

For Richland Township residents and Michiganders across the state, the question now is whether the Senate will act on the package and how the service tax debate will reshape the final deal.