“China is Michigan’s third-biggest export market after Canada and Mexico…” reported the Detroit News, commenting on Gov. Rick Snyder’s eight day tour around Asia. “Sales to China in 2010 totaled $2.2 billion, up from about $700 million five years earlier.”
After signing a change in the state’s tax code into law, which replaced the Michigan Business Tax with a corporate income tax (effectively a tax cut), it seems Snyder has added foreign policy to his repertoire in order to attract businesses to Michigan.
“In South Korea on Sept. 30th, Snyder signed an agreement to strengthen cooperation with the province of Gyenoggi,” according to the Detroit News. “Michigan values the great contribution Korean-owned businesses are making to its economic recovery and wants other Korean companies who are thinking about making investments to know we welcome their business,” Snyder said.
“Overall, Snyder’s proposal will likely improve Michigan’s competitiveness,” a report by the Tax Foundation on Snyder’s changes to the tax code said. “The switch from the problematic Michigan Business Tax to a more standard corporate income tax could serve to make Michigan more appealing to business.”
Even as a newly conscripted member of the Democratic Party, I voted for Snyder, and I have to applaud his efforts to attract businesses to a state whose economic climate is nothing other than stagnant.
But, despite Michigan’s unemployment rate dipping to 10.2 percent in April of 2011 from its peak of 14.9 percent in August of 2010, the numbers are rising again.
At the risk of sounding like a member of the anti-tax wing of the Republican Party, I seriously think Snyder should do away with Michigan’s personal income tax. I know this wouldn’t affect businesses directly, since they aren’t people (no matter what Mitt Romney says), but right now the nationwide economy is suffering a lack of consumer demand.
A lot of commentators would like to say the American economy is suffering from a lack of confidence in the marketplace; but according to organizations like the Economic Policy Institute this is a phony problem.
The problem is that consumers don’t have money to spend on goods and therefore even though businesses around the country have a collective $2 trillion stockpiled, they won’t use it to expand or hire workers.
So why doesn’t Michigan let its residents keep all the cash in their wallets, so they can spend it on whatever businesses Snyder can court to the state?
Unlike Snyder, however, I wouldn’t fill in the budget shortfall that this kind of policy would create with cuts to seniors’ tax breaks and funds to education. To solve the budgetary quandary, Michigan should enact a statewide cap-and-trade scheme or a simple carbon tax.
This is feasible. According to the Tax Foundation (using data from 2008) the state of Michigan derives a majority of its revenue from property taxes, 37.5 percent, 32.4 percent comes from sales taxes, 20.3 percent from the personal income tax, 5 percent from licensing and other state operations and only 4.7 percent from the corporate income tax, so it’s only the 20.3 percent that needs to be worried about.
I don’t think enacting a cap-and-trade or a carbon tax in Michigan would be a panacea by any means, but it would do a myriad of things. It would shift the tax burden onto dirty industries — which taxpayers usually have to clean up after sooner or later (oil spill in Kalamazoo), and it would create a market for alternative energies and cleaner fuels.
The policy might attract “green jobs,” which even after the scandal with Solyndra aren’t as mythical as they might seem. A reason for Solyndra’s failings was that there wasn’t a market for solar panels, alternative energies or cleaner fuels.
The state could further expand on this by inviting companies to conduct natural gas exploration and capture; this could create a lot of jobs and service the market the state has created via a cap-and-trade scheme or carbon tax for alternative energies and cleaner fuels.
Michiganders should scrutinize the governor’s moves to better Michigan’s outlook to address the systemic problems we face. This is a blueprint, not a manual of any sort, and I only hope at the end of Gov. Snyder’s term Michigan looks more like it.
