Lawmakers: First, do no harm

Michigan seems to have caught a case of the “Kansas.” I woke up last week to reports that Michigan is considering eliminating, or at least cutting, its income tax. Let me be clear: this type of Kansas-style tax cut is not a cure for Michigan’s economic ails, and instead will only bring pain to the state. Cutting Michigan’s income tax will not create jobs and will not grow our economy. It will, however, give a big tax break to Michigan’s top earners, while hurting our schools, roads, parks and other services that are so important to our economy and quality of life.

While Michigan’s economy has been recovering from the decade-long recession that hit Michigan harder than any other state in the nation, it hasn’t fully rebounded. However, drastically cutting or eliminating taxes, as Kansas did, is not the way to improve our economic outlook. In fact, in the years following Kansas’ tax cut, the state had little to no job growth, failed to grow economically and entered into a perpetual budget crisis, leaving the state unable to pay its basic bills. Michigan does not want to follow this same prescription.

Cutting Michigan’s income taxes will starve the state budget and harm Michigan residents.

  • Income taxes make up about one-third of total state revenue.
  • Income taxes provide over one-fifth of state funds for schools.
  • About $7 out of every $10 of our state General Fund is from income taxes.
  • A 0.1 percentage point reduction (from 4.25% to 4.15%) in the state income tax would cut state revenues by between $230 million to $250 million.
  • Eliminating the income tax would pull over $9 billion out of our state budget.

lawmakers-graphic-for-blogEliminating the income tax would mean that Michigan couldn’t pay for even the most basic public services Michigan residents rely on, like clean air and water, drivable roads, public safety and good schools. Based on current projections, eliminating the income tax would leave the state without enough to pay for even one of the state’s most vital departments, Health and Human Services, which provides care for children in foster care, assistance to families who have fallen on hard times and mental health care to those who can’t afford it. We are still reeling from the Flint water crisis. Due to years of underfunding our transportation network, our needs are growing (and our roads will not be fully fixed by our recent transportation plan). And statewide, schools are still struggling to provide a high-quality education for our children.

Finally, to make things worse, this will primarily help those that least need it. Instead of asking wealthy, powerful interests to carry their share of the load, it will provide the biggest benefit to these people while providing little to no tax benefit to hard-working people who make more modest incomes. So at the same time that we are draining our resources to provide for good schools, colleges, and investments in our roads and communities—the things that are really important for economic growth and security—we are creating a tax system that favors the wealthy even more than it already does.

Lawmakers should take a hint from one of a doctor’s guiding principles: first, do no harm. Michigan needs to protect what we already have: a state income tax that allows us to invest in good roads, high-quality schools, and strong communities. Otherwise, Michigan’s budget and economy will suffer through death by a thousand cuts.

— Rachel Richards

Top ten ways the Earned Income Tax Credit keeps more money in Michiganians’ pockets

Today is Earned Income Tax Credit (EITC) Awareness Day, which helps ensure that low- and moderate-income people who are eligible for the EITC actually receive it. As we work to expand our outreach on this important credit, we also need to celebrate all that this credit does for residents, businesses and communities in Michigan and nationwide. (more…)

An income tax cut won’t boost the economy

Cutting taxes won’t create jobs or grow the economy. Michigan is already facing budget cuts because there is not enough money to fund schools, public safety and other important services that we value. Reducing the income tax would create an even bigger hole in the budget, leading to more cuts and making it harder to create a strong workforce ready for the 21st century, according to a new fact sheet from the League. (more…)

If there’s a will, there’s a way

A new video and visually engaging report out today strongly makes the case for rebuilding the state’s education system, protecting Michigan’s abundant natural resources and investing in roads and our communities.

The project is called The Michigan Dream at Risk, from the Michigan Economic Center, an affiliate of Prima Civitas, a nonprofit organization that works to create resilient, adaptable communities in Michigan.

Gilda Z. Jacobs, the League’s president and CEO, and board members Charley Ballard and Bob Kleine were interviewed for the project. (more…)

Rebuilding the Homestead Property Tax Credit

Gov. Rick Snyder wants to use some of the state’s budget “surplus” (higher-than-anticipated revenues) to restore a portion of the Homestead Property Tax Credit that was cut in 2011.

The governor reduced the HPTC starting in Tax Year 2012, eliminating the credit for 362,000 Michigan families. He now wants to restore the credit to about 100,000 of those families. (more…)

EITC expansion would keep workers out of poverty

President Obama’s 2015 budget rightly seeks to expand the Earned Income Tax Credit to more workers — particularly childless workers. The current EITC rules are unfair to low-wage workers who aren’t raising children, including noncustodial parents. Those workers receive such a small EITC that they can be literally taxed into poverty, or driven deeper into poverty.

By far, the largest share of the EITC goes to those in poverty who work and have children. The EITC is a refundable credit for low-income working families and has been successful at encouraging certain people to take jobs, particularly single mothers. The EITC promotes work and reduces the need for public assistance. (more…)

What’s your agenda for Michigan?

 

Consider this: This November, voters will elect a governor, all 38 state senators and all 110 state representatives.

Clearly, it’s an important year for our state’s future. The Center for Michigan, described by founder Phil Power as a nonpartisan “think and do tank,” wants your input. What issues do you want elected officials to address on the campaign trail – and in the state Capitol once they are elected?

The League is hosting a Community Conversation, one of many held around the state, from 1 to 2:30 p.m. Monday at the Greater Lansing Housing Coalition, 600 W. Maple St. Lansing. (more…)

Making Michigan a true comeback state

You may be hearing a lot about “surplus” revenue as the state budget season kicks off – and more importantly, how to spend it.

Last week, the House Fiscal Agency, Senate Fiscal Agency and Michigan Department of Treasury, put their heads together to give a new prediction. The upshot — nearly $1 billion more than expected. It would have been higher, but Treasury gave a very conservative estimate of $700,000 in unexpected revenue for the three years — the 2013 fiscal year that ended Sept. 30, the 2014 fiscal year that started Oct. 1 and Fiscal Year 2015. (more…)

Ten steps to boost Michigan’s economy

new report by the League outlines 10 steps Michigan must take to improve its economy, refuting the myth that tax cuts are a shortcut to economic prosperity. Included in the report are strategies for investing in the services and infrastructure needed to create jobs and fuel economic growth, as well as tax changes that modernize and strengthen the state’s revenue system.

It is an agenda for long-term economic prosperity that includes investments in education from early childhood through higher education, access to the health and mental health services needed for a healthy workforce, basic income security for those who cannot work or find jobs, and support for the community services businesses and consumers rely on. (more…)

Time to move the sales tax into the 21st century

A recent study by the Center on Budget and Policy Priorities concludes that most state sales taxes, including Michigan’s, are ill-suited to a 21st century economy because states have not kept pace with such trends as the growth of the service sector and e-commerce.

The report recommends four steps that Michigan could take to modernize its sales and use taxes to ensure that there is adequate and stable funding for services that are vital to economic growth such as effective public schools, affordable higher education, adequate public safety, and supports for families struggling in low-wage jobs. They are a broadening of the sales tax to include more services, laws to increase the collection of taxes on out-of-state and Internet commerce, the extension of the sales tax to online products such as books, music and movies, and  closing tax loopholes for online travel companies. (more…)

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