Wednesday, September 02, 2009

"A Better Future For Michigan" Urges New Tax Structure For State

Watching all these individual groups descend on the Capitol to protest budget cuts - from the filmmakers, to the mental health advocates, to the public safety officials, to college students and educators, and so on - I couldn't help but think, "Man, it sure would be nice to get all these people together to lobby for a tax structure that would adequately fund everything we need in this state". It's not enough to say "don't cut me!" with individual voices; odds would be much better if everyone would work together to press for the Legislature to do the right thing.

Better late than never, a new group of "education, labor and social service agencies" called A Better Future For Michigan has formed to try and address the current budget crisis. Here is what the group is suggesting, and these items have all been mentioned before at various times:

It called on Gov. Jennifer Granholm and the Legislature to:

• Close tax loopholes for business to raise $600 million.

• Impose sales tax on what the group's leaders called "luxury and nonessential" services (like entertainment, recreation, landscaping and spa treatments), raising $1.65 billion.

• Reinstate inheritance taxes to raise $100 million.

• And seek voter approval for a graduated income tax that would raise about $600 million a year in new revenue.

The graduated income tax would have a top rate of 6.9% for high wage earners, with others paying the current rate of 4.35%, and lower income earners paying 3.9%.

Gary Olson of the Senate Fiscal Agency pointed out a few weeks ago that it's not just the economy, stupid (although that is definitely a big part of the current problem), and, it's not that we are "overspending", as the Republicans like to claim, it's the fact that we have cut taxes too far, and we are taxing the wrong areas. This all sounds vaguely familiar too...

The percentage of their personal income that state residents and profitable businesses pay in state taxes has dropped over a full percentage point since hitting a high of 8.4 percent in the mid- and late 1990s. So far this fiscal year, the rate is 7.3 percent.

Residents aren't necessarily paying fewer tax dollars. But as their incomes have risen, they're giving the state a smaller proportion of their money -- 2 full percentage points less than they did a decade ago, Olson said.

Much of the reason for the drop is that Michigan has been cutting taxes and adding exemptions, essentially forcing state government to shrink. That's a welcome move to some, but a concern to others who worry the state is cutting too deeply into services such as education, policing and the safety net for the poor.

The state tax system also has failed to change as taxpayers' behavior has changed. Consumers are spending less of their personal income on sales taxes, for instance, because they're buying fewer goods, which are taxed, and more services, which are not.

Seems to me that someone had a 2% plan that sounded like it would fit that criteria... hmmm, trying to remember now... anyway, all these things need to be taken into consideration when we finally get around to getting this accomplished.

Look. The cold, hard truth is: This will not get done as long as Mike Bishop is running the Senate. Just face that fact right now. It's too late for this budget year, and you know it won't happen during an election year - but it certainly needs to be a campaign issue for progressives and people who care about quality of life in this state. If we start to set the perimeters of what needs to happen regarding our tax structure in the future, "reform" will be a lot easier to do after the current Senate makeup is wiped out by term limits in 2010.

The Republican answer to our fiscal woes so far has been "more tax cuts for business". From Hoekstra to Cox to Bouchard to Synder, that's all they can say. That's all they have to run on. If concerned groups stick together and keep pushing for this, not just for this budget but beyond, it will be a winning message - especially after we get done making the deep cuts we are about to make to government services.

Get it together, keep it together, and run with it.