With the recent passing of Richard Headlee Michigan lost one of its true heroes.
A corporate leader often credited with taking the Alexander Hamilton Life Insurance Company from life-support to industry preeminence, Headlee was a genuine “everyman” – equally popular and at ease with board members and mailroom clerks.
Though never elected to any public office, in spearheading the successful 1978 drive amending our state constitution to limit taxation, Mr. Headlee arguably had a greater impact on Michigan government than a whole pride of roaring public officials. Indeed, what is now part of Article IX capping total state revenue and requiring a popular vote before any taxes can be raised, is commonly known as “The Headlee Amendment.”
Nothing we could do to commemorate Mr. Headlee would be more appropriate than furthering the cause he championed. And, sadly, refinements of the Headlee Amendment have certainly proved necessary.
Several “loopholes” need closing:
- The “Fees” Loophole. There is an old riddle that goes: “How many legs does a horse have, if you call his tail a leg?” The answer: “Four – because calling a tail a leg doesn’t make it one.”
A favorite post-Headlee trick by public officials has been to bypass voters and raise taxes on their own authority through the simple expedient of labeling them “Fees.”
A ubiquitous example is the “Administrative Fee” imposed by local governments on property owners to cover the cost of providing the service of tax collection. The usual amount of this tax tax is 1%.
Now, common sense should indicate that a percentage-based calculation is not actually a fee-for-service since the cost of the billing process doesn’t change in proportion to the value of the property. A surtax by any other name is still a surtax. But our judges apparently don’t know that horse-legs riddle as they have actually approved this sophistry. (Their honors should look in a mirror to see that place from which hangs the horse’s tail.)
Since the courts are unwilling to take judicial notice of what is self-evident to the rest of us we need to establish definitely – and constitutionally – that government charges that cannot be avoided are taxes, whatever politicians might choose to call them.
- The “Fees” Loophole Redux. Another local politicians’ artifice is to charge a third party for some other ostensible service that is wildly disproportionate to the costs incurred – putting the revenue generated into the general fund where it disappears in a sea of expenditures.
A good example of this bit of chicanery is the “Cable TV Franchise Fee” charged to providers for the (apparently, ongoing) inconvenience of being granted right-of-way for their transmission lines. This fee – typically $2 to $3 per month – is, of course, passed on to and borne by subscribers.
To solve this problem we need merely require that any surplus of revenue raised from fees over the cost of providing the services they cover must be refunded.
- The Bait-and-Switch Loophole. Some taxes are so misleadingly labeled that they would likely be prosecuted as fraud were similar tactics employed by a commercial venture.
One such was the Michigan Airport Parking Tax levied beginning in 1987 on all long-term vehicle parking within 5 miles of an airport, primarily Detroit Metro. The tax had nothing whatever to do with either the airport or parking. The proceeds went to pay an accumulated $250 million in indigent health care costs.
An even more egregious example of this kind of trickery is a one-tenth-mil property tax sold to Wayne County voters in 1988 to fund construction of a juvenile detention facility. Enhanced public safety is a relatively easy sell to taxpayers. But the jail was never built. The revenue raised from the tax was simply diverted to cover other county expenditures.
Here we need merely hold government to the same truth-in-labeling and truth-in-advertising standards it applies to the private sector.
- The Eternal Revenue Loophole. Once politicians have a revenue stream flowing they are loath to ever dam it up again. So, many taxes have a way of living on long after their putative purpose has been accomplished.
Examples of this phenomenon are sometimes overt – for instance, the aforementioned airport parking tax that continued to be levied long after the health care debt was retired.
Others are subtle and obscure enough to bleed taxpayers for years without notice – such as the 7/8ths cent-per-gallon added to the state fuel tax in 1994 to fund removal of abandoned, underground, fuel storage tanks (mostly beneath out-of-business filling stations). The tanks had been disinterred and the tax about to expire when PA 390 0f 2004 was passed – amending the sunset clause in the original authorization and redirecting the $60 million in annual revenue into a nebulous, new “Refined Petroleum Fund.”
A constitutional bar on amending “sunset” clauses in tax laws would eliminate this problem.
- The Great Expectations Loophole. The latest revenue enhancement stratagem is to simply accelerate collection of future taxes. The governor and legislature recently authorized counties to move property tax due dates forward (to relieve the state of having to deliver scheduled revenue sharing payments), claiming that since the amount paid was the same there would be no additional cost to taxpayers.
Try out that logic on your mortgage company.
In fact, let’s try it out on the governor and legislature. If total cost is not affected by who has control of the money in the interim, they should have no objection to ending the practice of payroll withholding and permitting income tax obligations to be settled up in full on April 15th. After all, the amount the state receives will ultimately be the same, right?
Accelerating tax due dates is in fact merely a sneaky tax increase. This practice should also be prohibited.
Amending the constitution to put an end to all these shenanigans would be the best possible tribute to the memory of taxpayer champion Richard Headlee.
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More on constitutional law:
- Term limits redux
- The court of public policy
- Selling us a sales tax bill of goods (add 6%)
- In memoriam: The Bill of Rights
- Keep your government even closer
- No census con
- Drunk with power
- Down the sewer
- Highway robbery in the dead of night
- Term limits — A baby step in the right direction
- Freedom of speech
- Prohibition — No nobler the second time around
