It’s clear every week in Community Conversations that citizens want reforms and a redefinition of the size and purpose of Michigan’s public sector. But it’s clear from the abysmal state budget picture that it’s also going to take a whole lot of new ideas and wholesale changes to the tax code to create a sustainable public purse for our state in the future.
Michigan faces a $1 billion-plus budget deficit. Michigan also allows some $32 billion in tax breaks, as we’ve repeatedly pointed out in this newsletter.
A new coalition of some 20 organizations is calling for an end to some loopholes and an overall examination of our network of tax breaks.
Two former state legislators, Democrat Lynn Jondahl and Republican Don Gilmer, summed up the issue well in a recent Detroit Free Press column, saying: “Closing loopholes makes good sense as we watch the layoffs of state troopers and local law enforcement officers and firefighters, the slashing of prevention programs for at-risk families and children, and the reduction of needed mental health and health care services.”
Loopholes Jondahl and Gilmer cited:
No doubt, there is much more Michigan’s public sector has done to improve the efficiency of service delivery, but as the Center’s recent reform issue guide illustrates, there is still much more that can be done to stretch taxpayer dollars. But there’s also much more we can do to spread taxpayer burden more fairly by closely examining loopholes.
It’s also worth noting that the federal government is now pitching an idea — an increase in alcohol taxes — we’ve been yelling about in Michigan for years now. The last time Michigan adjusted beer taxes, we lowered them. Lyndon Johnson was president at the time. Simply indexing beer taxes to inflation would have, by now, resulted in a quarter-billion dollars per year in added revenue. As we’ve said before, it’s very hard to imagine industries leaving, or refusing to locate here, because the beer taxes are too high.
The real answer is a fundamental debate about the public purse — how much do we need to properly invest in the kind of 21st century services that will attract and retain prosperous business and employees? And what are the most equitable and sustainable ways of funding those services?
3 Comments
While closing tax loopholes is certainly important, the ones listed here are meaningless. If it is true that there are $32B in lost revenue annually, attention should be focused on those that contribute the most, not three whose combined total is 0.2% of the total.
Please keep your attention focused on important matters, not insignificant ones.
It is great to have our former legislators and bureaucrats talk about the $32 Billion of revenue not taxed. I may be wrong but it seems to me that the period when these two people served is also when we put in motion the tax rules that have put us in the position we are in today. If that be the case, I am not sure I want them to be solving the problem again. The three bullet points above they used to increase revenues does nothing to solve the budget shortfall other than make business do more work to collect and report stuff to the state.
On February 19, 2009, I posted a comment on another article at this site about this issue. Here is a small portion of my thoughts then and they stand today:
“1. Tax all pension incomes until one reaches age 62 to match the social security exemption.
2. Change the exemption amount to a lower amount than $86,800 and eliminate the indexing factor.
That way all all of us would be contributing to support the state budget and we probably could reduce the tax rate of 4.35% for everyone to a lower level. What a novel idea – reduce the tax burden rate to everyone!
Let’s get some dialog going that equals the amount of ink and space that is spent talking about where the revenue will be spent.”
This is an easy solution to implement, just change the 1040 tax form that everyone files so that these changes are in the form.
Lets work on some real tax equality to help solve our problems instead of finding ways to
exclude more income for some people to not pay taxes and making the tax burden fall on the rest of us who do pay taxes.
Tax Loopholes. We are really discussing a solution for the $ 1.75B Michigan budget deficit. Fixing tax loopholes is one of the means to fix it.
But, what is the most important thing to consider? How about ending the Michigan recession? One of the signs of ending the recession is increasing tax revenue. The revenue decline would stop.
But, the Governor and the Democrats have done everything that is possible to end the recession the past 6 years. It seems that the policy of picking winners and losers, 12 year tax abatements, and 15 year Renaissance Zones do not work to end the recession. These measures just point the way. Business taxes are not considered a problem, even when winners get tax abatements to move to Michigan. A Detroit News report recently showed that the state is not good picking winners and losers. Four companies researched did not use all the abatement or hire all the employees agreed to.
As a businessman, looking 12 to 15 years out, why would the business want to come to Michigan if the taxes rise in 12 to 15 years, so the business was no longer competive? Especially, why not go to a competitor state where the business taxes are abated 100% forever?