Recently, we have heard Governor Granholm say “Higher taxes aren’t the issue,” and even many conservative pundits have reluctantly agreed. They point to Ohio, and Illinois as having higher overall taxes than Michigan, and say “it works for them, why not us?” What do they not see? Maybe the following will shed some light on it.
According to the 2007 tax foundation figures, Michigan’s overall business climate tax ranking is 29th in the country which considers a number of tax factors, including personal income and sales taxes. Ohio ranks 46th in overall business climate which on the face of it would seem nasty, Illinois holds at 27th just under Michigan’s on the overall. The Key numbers to look at are the rankings on corporate taxes, and unemployment costs. Michigan is higher than Illinois , and eclipses Ohio on unemployment(Michigan 44th, Illinois 36th, and Ohio 16th) and On the Corporate taxes Michigan again ranks the worst. (Michigan 49th, Illinois 30th, and Ohio 46th) Something that isn’t ranked here is the simplicity of taxes in the respective states. (which may have something to do with decision making.)
One can pick and choose numbers to make their own particular argument, but the fact remains that Corporate costs such as taxes and unemployment (more taxes) are things which drive business to locate or not. Add to that the high percentage of manufacturing jobs lost due to competing forces, (blame the chinese, unions, etc whatever…) and you have a lethal formula for the loss of jobs and fiscal health for Michigan.
The fix however is not paying business to move from one location to another within the state, or even drawing “special projects ” to the state for a few new jobs. What is needed, is an OVERALL business climate overhaul. Do the following cost saving and simplification measures, and business will flock to Michigan:
1. Create a simple replacement such as the fair tax folks have recommended keeping the code as simple as possible. A simplified tax code with as few surprises would go a long way toward being able to calculate your true cost of doing business in Michigan.
2. Limit spending on special interests projects and grants, letting the natural economic forces draw the best companies. Eliminate the MEDC as it is a useless and expensive corporate giveaway program.
3. Eliminate licensing for most small businesses which now require them. In many cases, these licenses are only lobbied for by competing firms to create hardship by use of force (govt.) for smaller companies trying to survive.
4. Eliminate Unions for public sector jobs. Unions are unnecessary in government where the employer answers to all the people anyhow. It only adds cost and employs union leadership.
5. Base the public sector jobs pay on similar private sector. There is no legitimate reason our servants should make more than we do.
6. Reduce the public sector to the absolute bare essentials.
This is a start, but if this list was followed we would have in the matter of a couple years one of the most robust state economies in the country.