Michigan’s economic troubles to continue

… because apparently they think raising taxes to the tune of $1 billion is something that will rescue the state from its current financial crisis:

LANSING, Mich. – The state Legislature agreed early Monday to raise the income tax and expand the sales tax to services in a deal with the governor that quickly ended a partial state government shutdown.

For a little more than four hours, fewer state police patrolled Michigan highways, campgrounds were closed and road construction projects and lottery sales were stopped.

Applause broke out in Democratic Gov. Jennifer Granholm’s office when the final vote was announced at 4:18 a.m.

“This budget agreement is the right solution for Michigan,” Granholm said in a statement. “We prevented massive cuts to public education, health care and public safety while also making extensive government reforms and passing new revenue. With the state back on solid financial footing, we can turn our focus to the critical task of jump-starting our economy and creating new jobs.”

Granholm signed a 30-day extension of Michigan’s budget, which expired at midnight. The continuation budget keeps government running.

The Legislature agreed to raise Michigan’s income tax rate from 3.9 percent to 4.35 percent and expand the 6 percent sales tax to some services. Granholm signed both measures. Structural changes to state government — including the management of teacher and other public employee benefits — also are part of the package.

The tax increases should erase most of a projected $1.75 billion deficit in Michigan’s next budget. The final budget for the new fiscal year will include $440 million in spending cuts, including no inflationary funding increase for public universities and community colleges, Granholm said.

Captain Ed writes in response:

Adding taxes to Michigan amounts to a domestic Smoot-Hawley approach. Michigan already had the 14th-highest tax burden in the US. State and local taxes took 11.2% of their income before these tax increases. They now appear ready to leapfrog Arkansas, California, Minnesota, and New Jersey to enter the Top Ten of tax-burden states.

Note, too, that the Michigan government solved the problem by a 3:1 ratio of sacrifice. They increased taxes by over $1.4 billion, thanks to increases in both income and sales taxes that go into effect immediately. They only managed to shave $440 million off of their own budget. Given that the state budget planned for $42.6 billion in spending for FY2007, this represents a whopping 1% decrease in state spending. It hardly seems as though Michigan lawmakers even cracked the books of their budget to look for other opportunities for savings.

The increased burden of taxation will not help Michigan recover its economy. It will pressure businesses to move elsewhere at a time when Michigan needs investment and commitment to improve its financial stability. Instead of reversing the decline, the increased burden will escalate it, and next year’s revenue shortfalls will create the exact same problem for Michigan.

It’s a disaster in slow motion. Instead of taking a critical look at the reasons why Michigan’s economy has plunged, the state legislature has punted and stuck its citizens with the bill. That’s hardly a profile in courage.

Nope, it’s not. But it’s what Democrats do. Create a problem to begin with, and then compound it with the “solution.”

Moderate Voice blogger T-Steel, a Michigan resident, is frustrated and disgusted:

Trying to start and maintain a small business in Michigan is difficult at best. If the taxes don’t kill you, the regulations will. And our largest city, Detroit, is just a bastion of cronyism, terrible management, and bad attitude. Michigan lawmakers’ decision to squeeze we Michiganians will just cause many of us, including myself, to leave in revolt and out of necessity.

Not exactly what the Democrats in the state legisalture had in mind, to be sure, but then again, Democrats in that state have proven themselves not especially bright on fiscal matters, so it’s not exactly a surprise to see that they still can’t get it together – and in the process are driving out people they claim to want to “help.”

Via Right Voices.

Comments are closed.