By John Bebow - June 12, 2008
Take a look at this week's Crain's Detroit Business and you'll quickly notice not one, but two troubling stories about Michigan taxes.
First, there's the hew and cry over the recent tax breaks for filmmakers -- breaks worth millions that will result in big tax liabilities for those of us who live in Michigan. Notice, too, that some of the most vocal new critics are some of the legislators who almost unanimously voted for the payola!
Second, there's the apocalyptic tale of a high-tech business ready to leave Michigan over a 14,000 percent tax increase as a result of the new state business tax that was supposed to be simple and far, remember? Is this Plymouth example an anomaly? Probably. Does the new state business tax remain every bit as screwed up as it was a couple years ago when legislators started hacking at the old and confusing Single Business Tax? Yes.
But don't take our word for it. Trust in the legislators who continue to study, but not fix, the mess of their own creation: "Michigan's new business tax is complicated with a number of provisions that are detrimental to businesses, and not enough information has been distributed to this point so that many companies don't even know about credits that will help offset the tax burden, said a report of a subcommittee of the Senate Finance Committee," Gongwer News Service reported this week.
Citizens and business leaders own this. It's up to us to mobilize for change.
11 Comments
Good take. A tale of two taxes.
Michigan, while touted by our governor and treasurer as a "low tax" state, is one of the HIGHEST in the country.
We are 1 of 3 states to tax utilities at the full sales tax.
1 of 5 to tax the federal and state excise taxes (yes folks, we pay tax ON tax).
Our governor is the third highest paid.
Our teachers are 6th (not including retirement & health care which I'm sure puts them in the top 3)
Our prison guards 4th.
Our students rank in the bottom half of the country and our prisons are being filled faster than any of our neighboring states, including Illinois.
Time to wake up to reality folks, the unions and non-workers have killed us.
This business tax is finishing us off. For a non-profitable business to have to pay HIGHER taxes than under SBT, is just ridiculous.
And where do the citizens and legislature think business will "find" extra money? Let me let you in on a secret....
...JOBS. Yep, YOUR jobs.
When minimum wage was hiked last year, unemployment rose. Now, it is rising again and all our state can do is to increase the time for unemployment.
Well, guess what, extra unemployment tax (result of extended unemployment) will erase even more jobs.
100% of nothing is nothing and we are heading there fast.
While I feel for the Plymouth-based company, let's put things into perspective. The company's 2008 revenues are expected to be $18MM. To only pay $1200 tax amounts to a tax rate of less than 0.1%. I am certainly no fan of taxes, the rate this company has been paying was ludicrously low. While the new rate of almost 10% is too high, to complain about having to pay more taxes is completely unwarranted.
Now maybe you understand why I felt the need to recall Andy Dillon. You have yet to see all the fallout from their lack of willingness to do their job in Lansing. Sometime it takes a hit on the head to get attention.
There was no effort to do anything unlawful on the part of those who attempted the recall of Speaker Dillon. The breach of trust was the failure of our legislature to execute their oath of office and put the people of this state first. By any means necessary exposes the nature of the beast. The results of their efforts exposes their competence or the extent of their effort.
I hope the people in Michigan remember this in August and November. These people do not deserve to stay in office.
Rose Bogaert, Chair
Wayne County Taxpayers Association
Gerald's comment gives the right perspective--in my experience with previous tax refoms ( the switch to the SBT in 1975), only the losers come forward, not the winners, and the MBT analyses done by non-partisan staff show lots of winners. In this case Gerald, the math is more dramatic..the previous burden was .01 % or less. Perhaps calm, perspective, and patience might help everyone.
Sorry but you are way off base on this one. There are at least 60 major film productions scouting locations across the state. not one of them would be here if not for the Tax incentive. \
Not only do they bring a ton of new dollars, they also open eyes around the world that Michigan is really a beautiful place and a great place to visit.
Manufacturing is a dying sector. It's time we develop new sources. This does that.
Respectfully, I think you overstate the case about "huge liabilities" from the film incentive program. The MI Dept of Treasury hasn't cut anyone a check yet and the program has brought plenty of money spending "talent" into the state that wouldn't be here otherwise.
I'd also suggest that you consider the character of any legislator who voted for these bills only weeks ago and now have the shamelessness to argue that it was a bad idea.
Note to Rose -If there wasn't any attempt on the part of your recall junta to do anything illegal than why were forged petitions handed in. And why did you have to PAY people who lived outside of the district (in violation of Michigan law) to do such a lousy job?
John's column is right on the money. It is existing businesses that will create most of the new jobs in our state. Most of the out-of-state film companies that have taken advantage of this windfall, only became interested in Michigan after the state enacted a 42% credit. How long will it be before other states offer more?
I'm going to add to Teresa's comments about Michigan taxes being among the highest in the country. There are only 7 states in the nation that applies the sales tax to gasoline. As a result, our pump prices are tied with Indiana and Iowa for 5th highest in the nation.
The pump price in most states range from the mid $3.80's to the low $3.90's. All the states that have a sales tax applied to gasoline, including Michigan, have pump prices from $3.98-$4.10.
(Average prices: Most prices outside of Southeast Michigan are 5 cents higher than in the Detroit Area.)
I'm going to add to Teresa's comments as well.
I hear distinctive Bitterness at taxes in your comments ringing straight out of the Republican talking points bulletins.
A) Granholm gives 5-10% of her NET pay back to the state because she feels its too much when the state she leads is on hard times. Thats leadership! Of course the rest of the overpaid legislature has refused her suggestion to do the same.
B) her paycheck and those of the Legislative leadership were set back in 2000 by Governor Engler's appointment of a rarely used task force to evaluate and raise those key position's pay and Perks. Individuals he personally appointed. This while the Governor's chair, and entire legislature was GOP controlled. Explain that Fiscal responsibility from the “Conservative party”
C) Michigan's Tax burden is routinely listed in the MIDDLE of the Nation's tax burdens per CNN money, & Fortune magazine.
D) Thanks to Engler and the GOP legislature, our taxes had declined year over year for nearly a decade, and it had ZERO effect of raising Michigan's economy or attracting New Business. Thats OBVIOUS. Whats also obvious is that during hard times, it left our state with a financial Hole to pay bills with, hence the budget debacle and lack of legislative leadership for the previous 6 yrs to fix it. 6yrs of Republican Congressional control with "Low Tax -Policies".... Lets repeat that over and over again and maybe it will work someday.
E) For 30 yrs the SBT was in place through much of both Republican and Democratic leadership, yet niether one said, “our state was being harmed by it” until Mrs. Granholm came to office as a popular woman governor during a Republican controlled Congress. Back in the 90s we had higher payroll taxes, and the SBT, yet we had just as great an economy if not better than most of the nation. – Explain how higher taxes and this Bad SBT killed off our economy in the 90s?
Oh yeah, it DIDN’T.
F) Every shred of evidence available suggests that blindly cutting taxes to see if it spurs growth doesnt work. Not Federally or State level.
There are other states with higher taxes than us in many ways, and others with less taxes, and all are doing better than our state is right now, explain the connection too? There isnt one. The best tax policy is to use targeted industry tax breaks for industry that will actually help us grow- Which is exactly what the MEDC is doing and has been for its entire existence.
G) Dick Devos routinely Lobbies for lower taxes for his business. WHy? Amway hit hard times a few years back because they got spanked by the Courts for their business practices, which when fixed, decreased their "IBOs" which decreased their sales.
So what was their great business plan? Fire workers in the US. Invest overseas. Wow. Only the most Saavy businessman coulda thought of that one.
Would tax cuts for his business do anything but help him get richer off higher profit margins? would that have changed his decision to fire people in Michigan for lower sales? No & No. Companies Dont Keep unnecessary employees while on hard times. But they’ll do anything for higher profits for the Ownership.
H) Michigan's problems are Solely Due to the Auto industry's Near total Collapse in the past 7 yrs. That industry with its many Suppliers has lost nearly 400,000 jobs, and more going. In 2005, a study was released by a think tank in Michigan about our employment that measured the improvements we have had in other sectors showing Michigan would have actually had a decrease in Unemployment by .1% from 2001-2005 if discounting all Automotive industry Losses.
Tell me what State and Federal Tax policy is going to convince or incentivise Americans to buy more Domestic big3 Trucks/Vans/SUVs/and Cars?????
What Tax cuts can we put in place that fixes that?
We Cant because its not the problem; And Nowhere is $3.85/gal gas going to fix the problem vs $4.10/gal gas either. If Gas is Lower in other states, and that’s the fix, why arent they buying Ford, GM and Chrysler vehicles again? Are you suggesting state taxes are behind $140/barrel oil? Whatever.
Gas Tax is not the problem either. It wasnt when gas was $.99 a gallon in Michigan 8 yrs ago either.
I) Tax Tax Tax, root of all evil Tax!
Without Taxes, we'd have no fire departments, no education system, no police, no security, no infrastructure, no order, no Parks, no campgrounds, no snow plowing, no highway maintenance, and LOTS more homeless than we do now.
Taxes arent a problem for me or average citizens being harmed by this Meteoric rise in cost of living.
I make the average wages according to the IRS nationally; And my biggest cost is Health coverage, and Social Security/Medicare that people keep saying -I wont get when im old. Why am i having a big chunk takin out of my pay for something i wont get?
Why is my health coverage for myself and my family so costly that its the single biggest cost of my yearly pay?
its larger than my Federal and State and local tax combined.
If you make enough money that your biggest problem is your federal and State tax, then stop whining, because you make plenty and be thankful. If you're not getting ahead on that income, then you live beyond your means.
Im not saying at all I wouldn’t be happy to pay less or no taxes on anything. That’s not the point. If you cant drop the taxes without harming the state or its future, then don’t. And its not the core problem anywhere. The core problems are International trade imbalances, the Weak dollar, Oil Speculators, Oil industry setting itself up for a fine line of production supply, Rising National Debt, Health care costs, a retirement problem with underfunded medicare and social security, Business & Govt. that wants to A) outsource everything to high cost, low performance results, and B) ship all business overseas for low costs and High profits selling back to Americans looking for jobs, and Overinflated top salaries that have no business being so high, especially when their companies underperform.
Conservatives today are not like they were 20-30 yrs ago. Even Past Republican legislators have supported polices the governor has suggested or implemented because she has run our state fiscally responsibly by cutting as many employees as possible while maintaining and modernizing services to the people. We now have the lowest number of state employees we have had in decades – Under a Democratic leader, instead of an Inflated level under the previous Republican one.
You have to Invest in your state to expect a return. We cant cut budgest, cut services, cut education, cut employees, cut revenue out of this mess.
That’s what this entire Website’s purpose is for.
Same old policies wont work. We need innovation and Accountability, and we arent going to get it by cutting all our taxes to nothing.
Speaking of Taxation...
Anyone realize that the Federal Tax rebate checks that the IRS sends out, are getting seized by a program that audits the IDs of those getting a check cross-referenced to a list of IDs that owe back taxes, child support, etc.?
All the states are getting their Back Tax revenue owed sent to the State IRS coffers.....Except Michigan and a couple other states.
Michigan PAYS private contractors to get back taxes owed, and hence Failed to send a list of those deadbeats to the Feds, and hence Failed to get back Millions on the cheap.
Arrrrr! our state needs all the cash it can get. And this would have helped refill at least a portion. And maybe reduce the amount we have to spend to these contractors.
USAToday -
http://www.usatoday.com/money/perfi/taxes/2008-06-24-deadbeats_N.htm?csp=15
Steve--I love your insight and I can see you do, and have done, your homework with what your wrote! Some people just write to write without really understanding the issues. READ PEOPLE!
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