Tax cut would hurt, not help, Michigan

LANSING -- Here's something that is clear to everyone in Michigan: The state isn't nearly as rich as it used to be, and state government doesn't have the money it used to have.

As a result, in recent years the state has cut revenue-sharing payments to cities and townships, again and again. Welfare payments have been cut off for tens of thousands of children from poor families.

There also is broad agreement that large portions of the state's infrastructure are wearing out or falling apart, and that Michigan needs a better-educated workforce to compete for high-paying, high-tech, new-economy jobs.

So what does the Michigan House of Representatives propose to do? Evidently, make sure that the state has even less money to spend on essential programs. That may seem ridiculous, but this month the House voted overwhelmingly to lower the state's income tax rate from 4.35 percent to 3.9 percent over the next six years.

By the time the tax cut fully kicks in, it would leave the state with perhaps $800 million less every year -- even though the state enacted severe aid cuts two years ago to elementary, secondary, and higher education. A small fraction of those cuts was restored this year.

The situation with Michigan's roads may be even more dire. State highway officials have forecast that at present spending levels, only 44 percent of the state's roads will be in good or fair shape eight years from now.

For two years in a row, Gov. Rick Snyder has proposed raising the gasoline tax and vehicle registration fees to produce $1.4 billion a year in needed new money to fix the crumbling highways. But his own GOP-controlled Legislature has refused to move on the proposal.

The House then happily voted 97-13 to starve necessary programs even further. What were they thinking?

State Sen. Steve Bieda, a Democrat who served three terms in the House, thinks this is all about election-year political posturing.

"It seems to have all the hallmarks of election fodder," he said. He added that so far as he knew, there are no plans to take the issue up in the state Senate. Every seat in the Michigan House is up for election in November; senators and the governor don't have to run for another two years.

Mr. Bieda, a savvy observer of the legislative process, noted that House Republicans may fear they are vulnerable on the tax issue because they have "shifted a lot of the tax burden from corporations to individuals." Mr. Bieda said House Republicans supported the governor's program of radically cutting business taxes and, for the first time, taxing pension income -- something that is wildly unpopular with many voters.

Once it was clear that the income tax cut bill would pass, most House Democrats felt they had no political choice but to support it too.

One Democrat who didn't was an indignant state Rep. Vicki Barnett, who told her fellow legislators: "This makes no sense in terms of creating a stable funding source for necessary programs."

She sarcastically added that she "would like to join you in the fun and games," but hadn't been sent to Lansing "to pander for political gain in an election year."

The tax cut's sponsor is freshman state Rep. Nancy Jenkins, a Republican from rural Lenawee County near the Ohio border. Asked how the state could afford the cut, Ms. Jenkins, a former real estate title examiner, said: "This bill is based on expected revenue and will not lead to program cuts."

But that seems fairly absurd to perhaps the top expert on the state's economy, Michigan State University professor Charles Ballard. Reached in London, where he is teaching this summer, Mr. Ballard, author of Michigan's Economic Future: A New Look, called the tax cut bill "extremely unfortunate."

"The mantra seems to be, 'If we just lay off enough teachers and police officers and firefighters, if we just let enough roads and bridges and schools and parks and sewers crumble, then Michigan will be a wonderful place and people will flock here,'" Mr. Ballard said.

For years, he noted, conservatives have argued that tax cuts would stimulate economic growth, which would soon be so large that tax money would roar in, even at reduced rates, and more than make up for the earlier cuts.

"But the evidence just isn't there," Mr. Ballard said. There is, however, plenty of evidence that tax cuts have an effect: "The best way to think of this is as another part of the biggest trend of our lifetime, the phenomenal increase in income inequality."

He added: "The main thrust of the tax cuts has been to reduce the liabilities of those at the top of the income scale. That in turn leads to pressure for reduced spending, largely on programs that benefit low and middle-income citizens.

The bottom line, he said, is that tax cuts such as the one enacted by the House "only make sense if you are comfortable with a distribution of income that is dramatically more unequal than the one we had 40 or 50 years ago. Clearly, a lot of folks in the Michigan Legislature are very comfortable with the increase in income inequality."

Whether most Michigan citizens are even aware of what is happening is another, largely unanswered, question.

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