By Alex Rosaen
Anderson Economic Group
Michigan is single again—economically, that is. The global economy, which once fawned at our brawny manufacturing arms and fluttered at our dense clusters of industrial might, has broken up with us. It flirted with those high-tech guys in California (while we were still together, the nerve!), then left us for the slick financial centers in New York and London. Sure, there’s some satisfaction in seeing the economy get burned by these players. But it’s still not coming back to us. Unless we want to be alone, it’s time to start dating again. It’s time to upgrade our look.
Wait, what is there to “upgrade?” What’s so bad about us? “Nothing!” our good friends tell us, perhaps too enthusiastically. We’ve got a great history of proud accomplishment. We’ve got a lot of talent and education. Sure, our outlook is sometimes a bit cloudy (and rainy, and icy, and snowy, and slushy), but we’ve got some great skills. And, our friends tell us, “you’ve got a great personality!”
And that’s when it hits us. Oh, no. A great personality? We’re not as sexy as we used to be, are we? Wait, what about our “cool cities?” We got that earring and those sculptures downtown. Isn’t that enough? No. We can’t make ourselves cool or sexy again overnight. But there is more we can do.
Some things aren’t under our control, but we have to do the best we can with what we’ve got. And that means updating the wardrobe, hitting the gym, and lowering the tax burden on businesses.
According to Anderson Economic Group’s “2008 State Business Tax Burden Rankings,” we’ve been taking the economy for granted a little bit, ranking 22nd lowest in the nation on business tax burden. This includes all the business tax incentives we already have in place. Being near the average is not awful, but we can do better. And, if we want to get back out there and get a new economic partner, we must.
But wait, isn’t that a little simplistic? Superficial, even? The businesses don’t care only about taxes. Besides, everyone gossips about those “low tax, low service” states. We don’t want to seem desperate, do we? Do we want the kind of attention that will give us? Well, let’s take a look at some of the top 10 states for low business tax burden in that Anderson Economic group study to see if they’re on a road we don’t want to go down. North Carolina is tops on the list right now, and they’re pretty classy; they’re growing quickly and they’ve got a cluster of research universities like we do.
Delaware at second lowest, yet they are fourth highest in state spending per capita in the Tax Foundation’s 2007 rankings; this is no one’s vision of a low-service state. Minnesota comes in at number eight. Minnesota? We went to high school with them! Wow, they’re really taking care of themselves!
The presence of these states in the top ten shows that having a low business tax burden does not require us to compromise our values, skills, or education. They’re not desperate or superficial; they’re just making an effort. While some combination of other revenue sources and spending reforms will be required, becoming a top-10 low business tax state is achievable.
The Business tax burden is not the only thing potential suitors care about, or even the most important thing. But we can’t change our weather, our economic history, or those wrinkles at the corners of our eyes. We can start putting in some effort by wearing a new shirt, doing some crunches—and lowering our tax burden on businesses.
Alex Rosaen is a Consultant in the Public Policy practice area at Anderson Economic Group in East Lansing, Michigan. Anderson Economic Group’s “2008 State Business Tax Burden Rankings” will be available in the “State Economic Handbook” published by Palgrave MacMillan, and are currently on our website at AndersonEconomicGroup.com
2 Comments
I like your main points, Alex, but are you cherry picking your own data?
You pull out low biz tax burden Delaware and Minnesota as winners, and you could also add Connecticut (!!!!!) to that list. (by the way, all three have graduated income taxes…and all three have higher overall state and local tax burdens than Michigan…hmmm…)
But the other seven on your list of low biz tax burdens had lower per cap incomes than Michigan in 2007. … Including Missouri, Tenneseee, New Mexcio, North Carolina, South Dakota, Ohio and Georgia.
Now, I expect Michigan will fall further down on per cap income in 2008…but not because of tax policies. It will be because we rank 34th in percentage of college grads in our state. There is no reason to think we can continue to be 26th in per cap income when we are so low in the number one assett in the knowledge economy, brains.
All of this talk of taxes misses the point. We need to figure out what it will take to train and keep more college kids here. We have high tech/medical/creative jobs going begging, even in the recession. When those companies realize there is not enough raw material here to stay, they will leave. And when they leave, they won’t be looking for the lowest business taxes. They’ll be looking for the most talent.
When Volkswagen picks a location for its $15/hour factory jobs, it goes to low tax, low education Tennessee. When it picks a location for its headquarters and those $25/hour high education jobs, it goes to … suburban Washington D.C., in Virginia, where your analysis says the biz tax burden is almost the same as Michgian, a state with a grduated income tax (so those well-paid VW hq workers are paying 5.25 percent income tax)…but a region where there are lots of talent workers, so they can fill their office easier with bright folks.
Why are we not having a debate in Lansing about what it takes to build our supply of talent workers? Why aren’t we talking to those young grads who are going to high tax states — states with (dare I say it?) cool cities, where mass transit is more than just a dream, where museums are growing and centering urban growth, not being slashed, where universities are getting a bigger share of the state’s pie, not smaller?
How does becoming the lowest-biz tax state in the nation encourage the kids that Dow, Kellogg, Steelcase, and other headquarter companies need to thrive to stay here in Michigan? Is there any evidence that shows those kids care about taxes at all?
There you go again. This famous line by Ronald Reagan during one of his presidential debates is one of those you never forget. Well Alex, there you go again. You being those who consistently claim that lowering business taxes will be the elixir Michigan needs to cure our ills. Well as one who has been around the Capitol block a few times I can tell you that I’ve heard that ad nauseum and seen that action taken time again. I was there when the income tax was lowered and the SBT elimination set in motion all in the name of creating jobs and growth. And guess what, it hasn’t worked. How about trying something different this time like looking at the market research as to why places like Chicago, Madison and Minneaplois, are thriving. Its because all kinds of people are seeking out a certain lifestyle that only vibrant places can provide. Let’s start investing in what really works; places and people. I got another famous line…the definition of insanity is doing the same thing over and over again and expecting different results. Yep Alex, there you go again.