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Parting Shots

By Wm. R. Lowry
Editor & Publisher, MiBiz
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note-able quotes

“The national date for Tax Freedom Day 2011 is later than last year largely because of income changes rather than statutory tax law changes. As the economic recovery continues, individuals’ rising income pushes them into higher tax brackets. Also, corporate tax revenue has also seen a resurgence.”

— Kail Padgitt, Ph.D., Tax Foundation

freedom not free

Tax Freedom Day — the date on which Americans had worked long enough to have earned enough money to pay this year’s tax obligations at the federal, state and local levels — fell with no fanfare on April 7 for residents of Michigan.

The average date for all Americans, as calculated by the Tax Foundation, was April 12. Michigan’s day, interestingly enough, was the 25th Tax Freedom Day to arrive out of all 50 states. That, in my book, reveals our state to be pretty darn average — or is it mean?

The outliers included Mississippians, who celebrated their freedom first on March 26 after only 85 days of hard labor. On the other extreme, Connecticut will be the last to observe Tax Freedom Day (May 2nd), with 122 days required for that state’s taxpayers to pay the year’s tax total.

Tax Freedom Day answers the basic question, “What price is the nation paying for government?” An official government figure for total tax collections is divided by the nation’s total income. The answer this year is that taxes will amount to 27.68 percent of our income — the same percentage of the year accounted for by the 102 days from January 1 to April 12.

While the Tax Foundation data for Michigan should serve to quell the everlasting debate among interest groups in Lansing over whether Michiganians’ tax burden is too high or too low, no one should be particularly pleased with simply being average.

Case in point: the Business Leaders For Michigan organization, composed of CEOs of the state’s largest employers, set forth an agenda last year aimed at restoring Michigan as a Top Ten state. A lofty goal to be sure, but then we Americans have a long history of responding to achieving lofty goals. In terms of individual tax burden, the data show we have lots of room for progress.

On the other hand, a major component of Gov. Snyder’s master plan to state recovery revolves around restructuring the state tax code to reduce business taxes to encourage job creation. He accomplishes this largely by shifting more responsibility onto residents to pay for their own government and its far-flung programs.

While a worthwhile long-term goal for Michigan should be to achieve a below average tax burden for individuals and businesses alike, the only logical short-term approach likely to succeed must entail unleashing the job creation engine of business.

Simply put, additional jobs simultaneously create additional taxpayers and reduce the need for many unemployment-related, state-provided services. Spreading the resulting lowered cost of essential government-delivered services then effectively paves the way for meaningful discussions (debates) over increasing spending or reducing tax rates.

Until that day arrives, reducing the cost of doing business in our state by minimizing taxes and retiring onerous regulation is what government can — and must — do.

notable quote

“We estimate that 2011 began with robust job growth of 3.8 percent at annual rate, reflecting in part a bounce in manufacturing.”

— George Fulton, Director, University of Michigan Research Seminar in Quantitative Economics

jobs engine

New data emanating in early April from the University of Michigan’s Research Seminar in Quantitative Economics seems, at first blush anyway, to contradict the argument for reducing business taxes.

The UofM researchers reported that the Michigan economy is off to a stronger start for the year than previously expected and will add more than 64,000 jobs this year — almost 10 times as many new jobs as economists predicted just months ago. According to the new data, the state will add 64,600 during 2011 and 61,500 during 2012. In November, the same economists expected job gains of 48,000 in 2012 and just 6,300 for this year.

The rub, says Seminar Director George Fulton, is shrouded in the fact that Michigan has shown stronger job growth than the nation as a whole during the weak recovery. Going forward, he predicts, that position will flip, echoing past recessions where Michigan’s manufacturing-dependent economy showed high rates of unemployment quickly, but regained some of those lost jobs earlier and faster than the rest of the country.

Which leads directly to the question of what it will take, numerically speaking, to regain all Michigan jobs lost during the Great Recession. Answer: ginning up the job creation engine called business.

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