COMMENTARY

Michigan governor's tax plan finds support

4/1/2011

DETROIT -- Everybody agrees on this much: The wrenching changes Gov. Rick Snyder wants to make to Michigan's tax system and spending priorities are designed to attract new business.

He believes that's the only way to recharge and reinvent the state's economy. The former computer executive and venture capitalist said so when he was running for governor, and he has stuck to his guns since.

But what do the companies and corporations that are already here really think of the governor's budget? Business is, after all, scarcely monolithic. Ford Motor Co. wouldn't appear to have a lot in common with, say, a family-owned restaurant in Traverse City.

So last week, I talked to two leaders who represent a broad cross-section of the different worlds of Michigan business.

Doug Rothwell is president and CEO of Business Leaders for Michigan, formerly known as Detroit Renaissance before it went statewide in 2009. BLM includes 76 of the state's largest employers, who together account for almost a quarter of Michigan's economy.

Rob Fowler represents the other end of the spectrum. He is president and CEO of the Small Business Association of Michigan, familiarly known as SBAM. It has 10,000 members across the state, from mom-and-pop restaurants to high-tech firms.

Its membership represents firms that are responsible for the vast majority of job creation in the state, especially, Mr. Fowler noted, companies with 10 to 99 employees.

Large businesses and small ones have historically been taxed at different rates, and Mr. Rothwell and Mr. Fowler haven't always seen eye to eye. But they are in total agreement on the governor's budget: They support it, totally, completely, right down the line.

"I think the governor's tax plan is the right thing to do, even though some of our members are going to pay more," Mr. Rothwell said. "What he is trying to do here is address what ails Michigan now, and it is important to have a comprehensive approach."

Mr. Fowler, who also has held leadership positions in small-business groups in Michigan and Ohio, put it this way: "You have to understand the moment in time we are in," a moment marked by a stagnant economy and a huge budget deficit. "Sure, there are things in the governor's plan I am sure, standing by themselves, our members would not support."

But in words echoed by Mr. Rothwell, he said it was important to take the plan as a whole. Both men worried that if lawmakers started picking off pieces, the whole carefully crafted budget will unravel.

Take the most unpopular part of the budget: the governor's proposal to tax pension income. Last week, Republicans in the state Senate came up with a counter-proposal. They suggested beginning the tax on people who haven't begun receiving pensions yet, and "grandfathering in" tax-exempt status for the rest.

They would cover the resulting shortfall partly by increasing the proposed new corporate income tax from 6 percent to 6.75 percent.

Mr. Fowler thought that was a poor idea -- even though many of the businesses he represents wouldn't pay the tax regardless. "I'm tempted to say they are trying to snatch defeat from the jaws of victory," he said of the Legislature.

Interviewed separately, Mr. Rothwell was even more negative about the Senate suggestion. "This would make us much less competitive," he argued.

Mr. Rothwell has experience in both the private and public sectors. He was previously a credit card company executive and then head of the Michigan Economic Development Corp.

He's crunched the numbers, and says that if it is enacted as it stands, the governor's proposal would make Michigan the 15th most business-friendly state in the nation. Add the changes the senators want, and Michigan's competitiveness quickly falls to 30th.

In case anyone wondered, the business leaders now rank Michigan at close to the bottom in its ability to attract desperately needed new jobs. SBAM, for example, ranks the state 48th in small business growth and dead last in payroll growth.

That doesn't mean both men are enthusiastic about the entire plan. Mr. Rothwell is uneasy and unhappy about the proposed cuts to education, especially higher education. Mr. Fowler, was, I thought, unconvincing when he tried to defend the governor's attempt to eliminate the Earned Income Tax Credit for the working poor.

But both are backing the entire plan because of the thing they like best about it: "This offers a coherent, comprehensive plan for Michigan's economy and the state budget over the long term," Mr. Rothwell said. For years, they've been dealing with politicians who offered gimmicks, quick fixes, and one-time patchwork solutions.

SBAM's Mr. Fowler agreed, noting that it is the only real overall plan on the table. That was unwittingly underscored this week by Senate Minority Leader Gretchen Whitmer (D., East Lansing).

She blasted the governor's education cuts, and said she would attempt to amend the state constitution to prevent money being transferred out of the school aid fund. But asked how she would make up the resulting deficit, she declined to say.

You can't fight something with nothing. That is why, in the end, the governor will likely win.

Jack Lessenberry, a member of the journalism faculty at Wayne State University in Detroit and The Blade's ombudsman, writes on issues and people in Michigan.

Contact him at: omblade@aol.com