By John Bebow - October 9, 2008
Dozens of top-rank public finance experts gathered at Michigan State University this week to mull the state of the state's finances. We're in the process of obtaining all PowerPoint slides from the two-day affair for publication in next week's "Fresh Thoughts."
Below is a sneak peak of the kinds of issues you can hear when policy wonks get together but can't often hear when politicians get together. (In fact, while legislators were not in session for the conference, only three — Brenda Clack, Hansen Clark and Joan Bauer — were registered to attend.)
Michigan has a lousy national reputation for high taxes (thanks for the inaccurate tirades, Wall Street Journal). And yet we're very kind to ourselves. Michigan income tax law includes $1.1 billion in annual giveaways — tax credits for all kinds of things: property taxes, home heating bills, adoptions, stillbirths, farmland preservation, historic rehab of buildings, college tuition, contributions to community foundations, contributions to homeless shelters, contributions to food banks, contributions to public television, and vehicle donation credits. (Those details come courtesy of MSU Professor of Economics Paul Menchik.)
Snowbirds have it too good here to move away! The amount of income tax paid by seniors in Michigan is actually negative due to tax breaks and the fact that Michigan doesn't tax pensions. This will become quite a burden on younger workers in coming decades as the over-65 crowd grows at three percent a year. (Again from Menchik) Here's a thought… Take your pick from two very different reform ideas… We either significantly increase taxes on seniors so they pay their fare share, or we market the hell out of the fact that they get a free ride.
Michigan is one of only six states with a flat income tax rate. Thirty-six states benefit from a graduated income tax resulting in a more progressive distribution of tax burden. Moving to a graduated system would actually result in a tax CUT for nearly nine in ten taxpayers. (Menchik)
6 Comments
Market the daylights out of it. Create even more tax based advantage for people to be here and market that as well. While we're at it, let's do a better job or marketing our tourism industry, eliminate the income tax altogether and develop a way to have visitors offset more of our costs.
Wow, what utter bs.
First, if taxes were fair and low, we would't have to "give breaks". This mentality that a removal of tax is somehow a tax cut is nonsense.
Second, Florida has NO income tax. NONE. And there property taxes are on line with ours. Add to that the facts that Florida does not apply full sales tax to utilities, nor rape you at the secretary of state and it is clear why Michigan sends so much of our tax dollars to retirees in Florida.
If this is the best we have, which is only to continue brainwashing people into believing the BS, then Michigan is in deeper trouble than anyone realizes.
My small company would save an immediate $25,000 a year by moving. Immediate. In nothing but taxes.
Have you ever been outside of Michigan? Notice that EVERYTHING is cheaper? That is directly attributed to our HUGE TAX BURDEN.
I'm done with this. The only "fresh" perspective anyone in Michigan seems to have is delusion.
[First, if taxes were fair and low, we would't have to "give breaks". ]
We dont HAVE to give tax breaks to anyone. Giving people Loopholes to avoid the set tax rate is a freebie, not a right, nor a requirement for anything.
When the Gov and MEDC or whomever, gives a targeted tax break to bring a company into the state or keep one from leaving its an incentive over and Above some other place that has lower rates due to some other reason.
– some states have lower taxes because they produce virtually nothing and persuaded only banks to show up, kinda like little Switzerlands. Michigan kinda started the last century with producing stuff and we kinda got lazy with it.
– Some states have low rats because they are more destitute under normal conditions than we are. Or at least were for an extended period prior to the 2001-2008 era of lowered vehicle purchasing.
– Some states like Texas and Alaska were blessed with so much natural Oil and Gas resources that they're residents actually at one point made money from the state.
Our state doesnt have that.
Our state has over 10 million people and needs an infrastructure and services, including supportin the tourism trade which helps everyone here.
Gee an i always though old folks went to florida because of the weather. At least thats what they all say. Must be because of their huge tax burden.
TeresaE – you seem to have the Most complaints on this website, the most abrasive language bordering on Hatred, and you always spout GOP ideas as if the past decade of so many republican policies have made our current situation so rosy.
Why dont you suggest some serious PLans with details to solve every problem and everyone else's complaints like the legislators are tasked to do?
Or.. alternatively, go ahead with your Threats to move your business Out of Michigan and make that extra $25,000 a year to sock away in the stock market.
I wish you luck with your business.
Great start for discussion on tax breaks but let's not stop with the above information.
You do not have to wait until age 65 to get free tax breaks. All of the early buyout folks are learning that their pension with the "bridge" for social security from date of retirement to age 62 is tax free. Given the other "subtractions" on Schedule 1 plus the personal exemptions, the early retiree is at about $100,000 of income that is not taxed.
This results in a loss of potentially $4,350 in revenue for every taxpayer who is taking an early retirement package. For every 100,000 retirees, the state is losing $435 million in tax revenue if no allowance was made. If we taxed half of it, the state would have $217 million of tax revenue to apply to lowering the business tax.
As if that is not enough, some of these same people are now able to get a property tax credit because their income is now below the limit for the credit
FYI… most of the seniors who are not taxed on their pensions have already paid tax on their payroll deductions at the time that the pensions were being funded. To tax them when they received their pension would be double-charging.
Penny O
No one receiving a pension has paid any tax through payroll deduction when the pension was funded so there is no double charging.
It is miss information like this that makes dialog so difficult
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