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Mackinac Center for Public Policy
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2013 House Bill 4234: Vehicle trade-in “sales tax on the difference”

Public Act 159 of 2013

  1. Introduced by Rep. Andrea LaFontaine (R) on February 12, 2013, to exempt from sales tax the value of a trade-in on the purchase of a new vehicle or titled watercraft. The buyer would only pay sales tax on the difference between the value of the trade-in and the purchase price of the new item. This would eventually save new car buyers (and/or dealers) some $220 million annually when it is fully phased-in after four years. The bill does not specify what spending items would be cut or other taxes increased to make up this reduction.
    • Referred to the House Tax Policy Committee on February 12, 2013.
      • Reported in the House on May 29, 2013, with the recommendation that the substitute (H-1) be adopted and that the bill then pass.
    • Substitute offered in the House on June 5, 2013. The substitute passed by voice vote in the House on June 5, 2013.
    • Amendment offered by Rep. Brandon Dillon (D) on June 5, 2013, to transfer money from the state general fund to the state school aid fund to make up foregone revenue in the latter caused by the proposed sales tax change. The amendment failed by voice vote in the House on June 5, 2013.
  2. Passed 100 to 7 in the House on June 6, 2013, to exempt from sales tax the value of a trade-in on the purchase of a new vehicle, recreational vehicle or titled watercraft. The buyer would only pay sales tax on the difference between the value of the trade-in and the purchase price of the new item. This vehicle part of this would eventually save new car buyers (and/or dealers) some $220 million annually when fully phased-in after six years. The bill does not specify what spending items would be cut or other taxes raised to make up this foregone revenue.
    Who Voted "Yes" and Who Voted "No"

  3. Received in the Senate on June 11, 2013.
    • Referred to the Senate Finance Committee on June 11, 2013.
    • Substitute offered in the Senate on October 22, 2013, to adopt a version of the bill that phases in the tax break over 24 years. The substitute passed by voice vote in the Senate on October 22, 2013.
    • Amendment offered by Sen. Steve Bieda (D) on October 22, 2013, to use general tax revenue to reimburse the amount that the tax break reduces sales tax revenue otherwise earmarked to the school aid fund. The amendment failed by voice vote in the Senate on October 22, 2013.
  4. Passed 38 to 0 in the Senate on October 22, 2013, to exempt from sales tax the value of a trade-in when buying a new motor vehicle or recreational vehicle. Senate Bill 89 would phase this tax break in over 24 years, and halt the phase-in if the federal health care law's Medicaid expansion (authorized by House Bill 4714) is rescinded. (Note: Legal experts are divided over whether the state would be allowed to rescind the "Obamacare" Medicaid expansion.) Under these two bills, the buyer would only pay sales tax on the difference between the value of the trade-in and the purchase price of the new car. Initially, the tax break would only apply to $2,000 of the price difference, and this would increase $500 per year. When fully implemented the tax break's value would reach $226 million (in 2013 dollars).
    Who Voted "Yes" and Who Voted "No"

  5. Received in the House on October 22, 2013.
  6. Passed 101 to 7 in the House on October 22, 2013, to exempt from sales tax the value of a trade-in when buying a new motor vehicle or recreational vehicle. Senate Bill 89 would phase this tax break in over 24 years, and halt the phase-in if the federal health care law's Medicaid expansion (authorized by House Bill 4714) is rescinded. (Note: Legal experts are divided over whether the state would be allowed to rescind the "Obamacare" Medicaid expansion.) Under these two bills, the buyer would only pay sales tax on the difference between the value of the trade-in and the purchase price of the new car. Initially, the tax break would only apply to $2,000 of the price difference, and this would increase $500 per year. When fully implemented the tax break's value would reach $226 million (in 2013 dollars).
    Who Voted "Yes" and Who Voted "No"

  7. Signed by Gov. Rick Snyder on November 5, 2013.

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