“The most important thing I learned (this year) is I’m not ever going to raise taxes again. It’s too hard. It’s too impossible,” Governor Jennifer Granholm told Associated Press in December 2007. “Especially in light of our economy and what we’ve been through. I just don’t think there’s anybody who’s interested in proceeding down that path again.”
Our response at the time, as published in Fresh Thoughts, was: “Well then. That must set the stage for an exciting new era of government reform and reorganization because there is no question the state is headed for huge long-term budget trouble.”
What a difference 14 months makes. We are, indeed, in budget trouble. And the governor is, indeed, using tax increases to help close that deficit. Altogether, the governor proposes some $230 million in increased fees, intensified tax collection and other revenue-enhancing steps. No matter what the talking heads in Lansing call them, those are tax increases.
Other options are available:
1. BALANCE THE BUDGET WITHOUT RAISING TAXES: The Center published a list of $1.5 billion in possible reforms – enough to balance the budget without raising taxes. More importantly, a bipartisan reform commission is preparing a much more comprehensive set of money-saving reform recommendations set for release later this spring. There’s no reason those reform approaches cannot be folded into this year’s budget debate, which is likely to continue for months.
2. TAX LANSING’S SACRED COWS: The governor’s budget drew immediate ire from beer and wine lobbyists because of modest liquor licenses fee increases totaling an estimated $24 million. Michigan’s tiny tax on beer hasn’t been raised since the 1960s. Simply indexing the tax for inflation for the past four decades would result in additional state revenues of more than $200 million. Adding a tax for unhealthy soft drinks – as at least 18 states have done – could bring in another $100 million. These are fair, discretionary taxes. It’s hard to see how business growth in Michigan would be stunted if the price of a bottle of Bud at the local tavern included a quarter for the state budget. But it’s the kind of tax that riles powerful, monied interests in Lansing. Therefore, it has long been conveniently ignored by elected leaders. Same goes for Michigan’s hunting and fishing license fees, which are among the greatest recreational bargains in America at a time when the state has seriously dis-invested in natural resources protection, hunting and fisheries programs, and enforcement.
3. CONDUCT A THOUGHTFUL, THOROUGH OVERHAUL OF THE MICHIGAN TAX SYSTEM: Experts like MSU economist Charley Ballard have a few ideas. Bring to the table business leaders and other interest groups in a disciplined discussion, and a modernized, competitive tax system could emerge.