STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 5798

October 9, 1980

INITIATIVE AND REFERENDUM:

Legislation increasing state income tax and stating purpose for which proceeds of tax may be used

Legislation enacted by the Legislature increasing the rate of the state income tax for a limited period of time and specifying the purposes for which the proceeds of the increased taxes may be used, subject to approval by the electors, is not an appropriation bill in the absence of provision for the designation of the person or agency to receive the money, how much is to be received and how the money is to be spent.

Honorable Ed Fredricks

State Senate

The Capitol

Lansing, Michigan

The Legislature enacted 1980 PA 250 to amend the Income Tax Act of 1967, 1967 PA 281, as amended; MCLA 206.1 et seq; MSA 7.557(101) et seq. In addition, 1980 PA 250, Sec. 2, provides:

You have requested my opinion on the following question:

Const 1963, art 4, Sec. 34, provides that:

In addition, Const 1963, art 9, Sec. 17, provides that:

1980 PA 250 purports to amend 1967 PA 281, supra, Sec. 51(1), in pertinent part, as follows:

'(a) Through December 30, 1980 ........................ 4.6%

'(b) From January 1, 1981 through December 31, 1985 ... 4.7%

'(c) January 1, 1986 and thereafter .................. 4.6%'

1980 PA 250 also purports to amend 1967 PA 281, Sec. 475, to read, in pertinent part, as follows:

The question of whether a bill passed by the Legislature is a bill appropriating money especially where a tax increase is proposed and the proceeds are earmarked for a specific purpose or purposes, has been addressed on numerous occasions by the Michigan Supreme Court. The most recent decision of the Michigan Supreme Court on the question is found in County Road Association of Michigan v Board of State Canvassers, 407 Mich 101; 282 NW2d 774 (1979), where the Court considered whether it was lawful to hold a referendum, as requested by signers of an initiative petition for referendum, on 1978 PA 426, which increased the tax on gasoline and diesel motor fuel, and 1978 PA 427, which increased the tax on motor vehicle registration. Relying on its previous decisions in Michigan Good Roads Federation v State Board of Canvassers, 333 Mich 352; 53 NW2d 481 (1952), and Boards of County Road Commissioners v Board of State Canvassers, 391 Mich 666; 218 NW2d 144 (1974), the Supreme Court found that the 1978 Legislation (1978 PA 426 and 1978 PA 427) increasing the aforementioned taxes must be viewed as part of a comprehensive single legislative program to collect taxes and to appropriate funds for transportation purposes. The Court, therefore, concluded that the acts under consideration must be read in pari materia with 1978 PA 444 as an appropriation to the Department of Transportation, counties, cities and villages, and, thus, not subject to referendum.

It must be observed that in Boards of County Road Commissioners v Board of State Canvassers, supra, 391 Mich 666, 672, fn 8; 218 NW2d 144, 147, the Supreme Court stated that there is a well recognized difference between merely authorizing an activity and actually appropriating the money to make it possible. The Court emphasized that the fundamental question is whether the act authorizes the expenditure of money received into the State Treasury without the aid of additional legislation.

The factual situation in County Road Association of Michigan v Board of State Canvassers, supa, and its predecessors is distinguishable from that under 1980 PA 250. 1980 PA 250 is not capable of being read in pari materia with any other act passed by the Legislature in 1980 or at any other time which would authorize the expenditure of the one-tenth of one percent of the increase in the state income tax for correctional purposes.

Further, an analysis of 1980 PA 250, Sec. 1, amending 1967 PA 281, Sec. 475, supra, reveals that subsection (1) specifies that the proceeds of the increase in the personal income tax from 4.6 percent to 4.7 percent shall be credited to the general fund, while subsection (2) restricts the use of such proceeds to certain specific and general state and local correctional purposes. Neither subsection makes an appropriation from the general fund since it does not provide who is to receive the money, how much is to be received or how the money is to be spent. Thus, it is incumbent upon the Legislature to make an appropriation of money in accordance with Const 1963, art 9, Sec. 17, if the people approve the referendum.

It is my opinion, therefore, that while 1980 PA 250 contains an expression of legislative intent to appropriate the proceeds of increased state income taxes for certain correctional purposes, if approved by the people, it is not an appropriation bill as such. Thus, it may be submitted to the people for their approval in accordance with Const 1963, art 4, Sec. 34.

Frank J. Kelley