LANSING ? The Michigan House Tax Policy Committee reported legislation Wednesday that would discontinue the charging of the sales and use tax on the value of a trade-in when buying a motor vehicle or watercraft.

The legislation (HB 4234 , SB 89 and SB 90 ) was reported unanimously by the committee after hearing testimony on the House bill two weeks ago.

The bill would discontinue applying the sales tax on the value of a trade-in on a new or used car or boat. This would only affect trade-ins and sales through dealerships, not through private owners. The bill does not include RVs.

The Senate bills phase in the change until 2022 when 100 percent of the trade-in value would become exempt from the tax. The House bill allows 100 percent of the trade-in value to be exempt in 2018.

The bills would reduce sales tax revenue by $125 to $150 million in a full-year, according to the House Fiscal Agency. This loss in revenue would reduce funds that go toward constitutional revenue sharing, the Comprehensive Transportation Fund and the School Aid Fund.

The Michigan Association of School Boards, the Michigan Education Association, the Middle Cities Education Association, and other education groups submitted a joint letter opposing the bills. The groups say the bills combined with other policies would add up to a significant amount of money stripped from the School Aid Fund.

Rep. Jon Switalski (D-Warren) offered an amendment that would take funds lost to the School Aid Fund and replace them with funds from the General Fund.

But Rep. Lisa Posthumus Lyons (R-Alto) said, “the amendment assumes that money will be taken from the School Aid Fund … and I don’t think that is provided anywhere in this legislation.”

Switalski said with various tax incentives provided during multiple administrations, the School Aid Fund is not where it needs to be and noted the majority of sales tax revenue goes toward the School Aid Fund.

The amendment, which he proposed for all three bills, was defeated along party lines.

The legislation appears to be on a collision course with Governor Rick Snyder, who opposes the bills. But given the overwhelming support they are receiving, passing the Senate 34-2, and facing little resistance in the House Tax Policy Committee, Snyder might be hard-pressed to carry out a veto given the votes appear available for an override.

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