Drowning the Great Lakes State in a bathtub

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Taking their cues from the New Orleans experience, certain portions of Michigan's government seem to think that we can cut or starve our way to health. (Ask a mental health professional for a name for this sort of thing.) Language denouncing "tax hikes" and fiscal recklessness abounds when these folks talk about our Governor. Fortunately, though, at least some people seem to have figured out that the facts don't support slashing our way to solvency. In the words of the Michigan Municipal League's Executive Director:

Despite the supposed tax "relief" of the last decade it is hard to find anyone who is not employed by the Mackinac Center that actually feels better off.

For those unfamiliar, the Mackinac Center is Michigan's leading advocacy group for auctioning off the social contract to the highest bidder. For some reason, people seem to listen to them when they talk about the State budget spiraling wildly out of control, and about tax cuts being needed to draw families and investment into the State, and denouncing any increase in fees or taxes as a "hike". Now, whenever I hear people launch into overblown rhetoric about how "when a family's budget is tight, it cuts spending, and so should the government," without any numerical backing, I get skeptical - sure, you can eat out less often, but there comes a point when you have to pony up and go out and find a second job. You don't just start calling your children "expenses" and auctioning them off to cut costs.

The other day, I discovered the Michigan Fiscal Responsibility Project, and their lovely little brochure of tax facts (pdf). Hooray for numbers. I particularly like:

  • Michigan's general fund budget is 39% lower now than it was in 2000, under Governor Engler. So much for bashing Granholm as a big spender. (See, as parallel, Bushies criticizing Clinton as fiscally wasteful.)

  • Michigan's budget is 47% lower than it was in 1978 - but our population is about 10% higher.
  • In 1978, the Headlee Amendment capped State spending at 9.49% of State residents' total personal income. We were at that cap in 2000 - currently we're $5.2 billion below it, and that despite steady economic slippage over that six years.

So Michigan has a general fund half what it was 30 years ago, and $5.2 billion lower than a mere 6 years ago as a share of personal income. So, returning to the statement at the beginning, do the residents of Michigan really feel they're better off now, economically, than they were 6 years ago? I'd say "no". Obviously, cutting taxes hasn't worked - at least, not when it's undertaken as an ideology rather than a strategy. What the State's bathtub-drowner ideologues are trying to cast as a "tax hike" sounds to me more like "admitting that our past strategy hasn't worked, and changing tactics." (Insert idioms here about insanity and trying the same thing and expecting different results.)

Now, certainly, I don't think spending willy-nilly is the answer to all of our State's problems. But there's definitely a category of "spending" that's more accurately referred to as
investment", and things like "education", "public health", "public safety", and "economic development" are all obviously within that category. Cutting government spending too far is like hypothermia - it may be a blood-efficient way of keeping your heart pumping a little longer, but it leads to death over time, and, even if you survive, you're going to be awfully unhappy when they're amputating your legs from frostbite.

Dear State Senate: Cutting off your legs does not make your body more efficient. Get off your shivering butt and build a damned fire already.

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tax benefits

so, we need to raise taxes? where is the money going that's already in the system?

my sense is that the existing legacy costs that are built in (bonds, retirements, health care, inflation) are eroding what little we do collect. we're eating out of the general fund, which means chipping away at the future.

so, what's the new system? a michigan flat income tax starting at 2x poverty rate and up, plus new gas and sales taxes? can we trade property tax reductions for raises in those other taxes, and keep education spending at the same levels?

btw, why are we thinking about an educational bond issue in Ypsilanti, when the reports earlier this week show that educational software and much of the technology designed for the classroom isn't working? shall we revive the use of books, chalk and paddles?

legacy costs

The legacy costs you mention are certainly a big part of things. Large chunks of the Michigan budget, outside of the general fund, are things we can't really use freely: medicaid costs, federal transportation funding, etc. Other chunks are dedicated to commitments we've made in the past - we have have fewer State employees than at any time since the early '70s, but we're still paying for a lot of the ones who aren't working anymore.

Certainly, I think there's a role for being more careful with what we invest in. Looking at roads and utility infrastructure, for example, I think that Granholm's "Fix it First" is exactly right. We should take care of the toys we've already got, rather than breaking them and buying new ones. There's no reason that we should be expanding expensive utilities far and away across the countryside when our population is steady or dropping.

I'd be perfectly happy with new gas, electricity, and sales taxes, as long as those taxes are paired with spending that mitigates the effects on poorer citizens. An increased gas tax shouldn't be used for miles of new roads out in Macomb County - it should be used to provide transit links and pedestrian connections over freeways so that people can get to jobs.

drowing in the tub

GM and other corporations are cutting/stabilizing legacy costs by raising co-pays, lump sum buyouts, 401k conversions, and just plain cutting of retirees. Buyouts of present employeeees also contain such revised provisions. Of course, new employees are offered entirely different packages. Cities and States might do the same. (Some are.)

The moratorium on all "new" construction is a good idea with current funds and new reources devoted to fixing what we have and/or supplementing present routes with mass transit alternatives. Following the lead of some Western States, Michigan is "setting up" its own initiatives for technology, bioscience and tourism ... hope they do it right.

The biggest changes they must make in Lansing in the new budget are: 1) a better business tax structure, and 2) an entierly new personal tax structure that fairly and flatly taxes the combined the values of income and personal property.

I recommend what I'm calling: Ed Penet's Family Value Tax ... with a protective floor to protect the low end and exempting social services/etc./and social security payments ... but no cap at the top ... say, in flat tax stepped increments of: a) 3% of all earned income + personal property value (@50% SEV) from $20,000-$499,999; b) 4% from $500,000-$4,999,999; c) 5% from $5,000,000-$no limit. No deductions. All on one page, supported by a notarized financial statement. [Based on what I'm taxed now, I'd be paying in an extra $1000 a year, and it would be worth it to have Michigan solvent (and cities like Ypsi, too).]

Mackinac Center propaganda

The "some reason" may be that the Center sends out propaganda to elected officials all over the state. One of my city council reps recently passed on a couple issues of the Center's "environmental" news rag, full of misleading and misinterpreted stories on subjects from climate change on down.