LANSING ? The Michigan House and Senate on Tuesday overwhelmingly passed bills that would discontinue charging sales tax on trade-in motor vehicles, recreational vehicles and boats when purchasing one.

The big change, as was first reported Monday by Gongwer News Service, was extending the phaseout of applying the sales tax to the value of the trade-in. Under the initial legislation, the phaseout would have taken 10 years. The revised version means a 24-year phaseout for motor and recreational vehicles, but those purchasing boats would immediately see the full value of their trade-in exempted from the sales tax.

The first bill, HB 4234 , unanimously passed the Senate 38-0 with an S-5 substitute. The House concurred in the Senate’s changes with a 101-7 vote, and sent it to Governor Rick Snyder, whose administration had opposed the legislation but relented once the Legislature agreed to a longer phaseout to mitigate the revenue loss for the state.

Meanwhile, SB 89 passed the full House with a 99-9 vote, and also saw some changes. It returns to the Senate for final passage, expected Wednesday.

The bills would, beginning December 15, gradually end the sales tax on the agreed-upon value of a motor vehicle or recreational vehicle used as part of the purchase of a new one. In the first year, only the first $2,000 of a motor or recreational vehicle’s trade-in value would be exempted, providing $120 in savings. That amount would grow by $500 each year, providing an extra $30 per year in savings, until reaching $14,000, at which point the cap would cease.

There is also language in the Senate bill mandating the phase-out stop if Medicaid expansion is repealed, although there is nothing to stop a future Legislature from stripping out that language in tandem with repealing Medicaid expansion.

Ari Adler, spokesperson for House Speaker Jase Bolger (R-Marshall), said compromises are often necessary to move an initiative forward, and these bills were one of Mr. Bolger’s top priorities for the rest of the year.

“The language calling for a pause in the tax-relief increase if the Medicaid law is repealed is an example of such a compromise,” Adler said in an email. “However, it in no way diminishes the importance or the value of the personal tax relief we are providing through the passage of Senate Bill 89 and House Bill 4234.”

Senate Majority Leader Randy Richardville (R-Monroe) also voiced enthusiasm for the action.

Similar bills passed both houses of the Legislature in the 2011-12 term, but legislative leaders agreed not to send them to Snyder because of his concerns.

“I’m excited because we’re giving something back to the average consumer and … giving something back that relates to the auto industry, which is kind of big in Michigan,” Richardville said after session. “And we’re telling people that financially we’re in good shape and we’re going to share that wealth … with the people that put the tax money here in Lansing to begin with.”

Bolger said the bills provide personal tax relief for residents who are “working up to a new car.”

He added: “The women and men of Michigan who are looking to get ahead through their hard work will now find some relief from the sales tax paid on their new car. We deliberately set aside millions of dollars for personal tax relief in this year’s budget that was available because we made tough but responsible decisions. Now, we can use that money to support new and used auto sales and give families another break.”

Richardville said at least for this year, concerns regarding the fiscal impact of the bills are “relatively small.”

“I think we’re talking about somewhere around five ten-thousandths of a percentage point … on the School Aid Fund,” he said, estimating that to figure to equate to about $6 million in a $14 billion budget. “So the schools will not feel this in any way, shape or form.”

Fiscal analysis of the previous version of the bills showed a $233 million reduction in revenues once trade-ins were fully exempt from the sales tax. Most of that would come from the School Aid Fund, with significant pieces also coming from the General Fund and constitutional revenue sharing aid to local governments.

Going forward, Richardville said, the legislation will have to be taken into consideration when doing the budget.

“But you know, it’s nice too because we’re not just stopping here,” he said. “Every year we’re going to try to giving something back. I think it’s responsible and it’s a start toward thanking the taxpayers for their investment in the state.”

Snyder press secretary Sara Wurfel said the administration could support the legislation because of the longer phaseout timetable as well as the language tying the issue to Medicaid. The reason for the link is that if the Legislature repealed Medicaid expansion, the state would lose the associated savings, she said.

“We feel comfortable with the approach and the balance that’s been struck,” she said.

This story was provided by Gongwer News Service. To subscribe, click on Gongwer.Com