Michigan Tax Facts For Your Next Cup of Tea

We probably shouldn't give the greedy anti-tax crowd as much press as we do. They are the embodiment of the lunatic fringe at this point, poor losers that were dismissed in the last two elections after "conservative" tax policy drove this country straight into the worst economic conditions since the Great Depression. But, since the traditional media insists on covering these "events" without providing the facts behind current tax rates in Michigan, it's up to us to gather what has been published lately and put it in one nice tea bag for those that like to brew a little reality in their opinions on taxes.

Senator Gilda Jacobs wrote a nice piece on tax reform for the Freep that was published yesterday. In it, she lays out some facts that are conveniently ignored by the "more tax cuts" crowd - basically, we have cut taxes throughout this decade, and it didn't work like the Republicans claimed it would.

If lower taxes were the sole key to a successful state, i.e., one with high per capita income and low unemployment, this decade should have been good for Michigan. In the 1990s, our state’s income tax rate was 4.4%, and our main business tax, the Single Business Tax, had a rate of 2.35%. Most of this decade, we have had an income tax of 3.9%; our SBT was down to 1.9%.

In 2000, Michigan spent 9.49 cents out of every dollar in personal income on state government. Today we are spending 7.69 cents of every dollar earned on state government — a 19% reduction in overall state tax burden.

Michigan’s reward for these tax reductions? Nation-leading unemployment and constant budget warfare. We’ve cut higher education spending dramatically, reduced funding to our cities, and even held K-12 spending down to about half the rate of inflation — steps that the “cut taxes” team tells us should have helped our economy. Instead, these kinds of cuts have made us less attractive to college grads and the companies that desire them, increasing the flight of that most valuable resource from Michigan.

And for all those that still erroneous claim that we are a "high tax state", our own Senate Fiscal Agency recently proved otherwise. Here's Peter Luke with some more facts about Michigan taxes-

Michigan tax and fee collections next fiscal year will be $10 billion below constitutional limits approved by voters in 1978. According to a new report by the Senate Fiscal Agency, the state ranks 30th in state and local per-capita tax burden. As a percentage of personal income, it ranks 25th. Its sales tax burden ranks 30th. State and local income tax burden ranks 33rd.

As a percentage of private gross state product, Michigan ranks 22nd in business taxes. In terms of per capita property tax burden, the state ranks higher, 14th, in part because the state levies property taxes on commercial and industrial equipment.

The stats on the MBT as opposed to the SBT have been hard to figure so far because we don't have a solid year-to-year comparison yet. Last year, they were still in the process of switching over. This year, revenue has tanked with the economic slowdown of the recession, making it hard to gage just how much it would bring in under normal circumstances. Still, if we want to "reform" business taxes, we have to look at overall revenue and the services this state needs to provide to maintain quality of life. Dillon is working on it, but where are the Republican ideas on reform, besides "more cuts"? Did anyone notice that they just destroyed education in this state with the budgets they passed? Is that the state we want to live in? No. Of course not. And neither will "business".

Both of the articles speak to tax reform, and come to the conclusion that a graduated income tax, as well as looking at taxes on services, could be the way to go. We could eliminate the MBT altogether - but who here really thinks that the Senate Republicans will lift a finger to bring comprehensive tax or government reform to this state? They are running for office in 2010 by trumpeting how "bad" things are in Michigan. It's almost like they enjoy the misery, because they see the opportunity to take power from it. They won't do anything that would eliminate their main campaign talking points, and they sure won't speak the truth when it comes to Michigan's current tax rates.

After all, the word "reform" falls from their mouth over and over again, and they still refuse to tell us what that means, besides "more cuts" to quality of life, of course. They also refuse to do the work. Last year, when the budget was wrapped up on June 25th, Mike Bishop had this to say-

"There really weren't any sticking points. We had the momentum going forward," said Senate Majority Leader Mike BISHOP (R- Rochester). "We knew where we were going to get in and cut."

Bishop added that in the future state government needs to take a more serious look at structural reforms to cut costs.

That was a year ago, and nothing has been done. It's doubtful that anything will get done this year, either. You can probably mark your calendars for 2011 though, with the hopes that when we finally get rid of this Do-Nothing Senate and elect some people who are serious about tax and government reform, we will see some progress.

Until then, remember the tax facts, and enjoy your tea.