Traverse City Record-Eagle

July 1, 2012

Jack Lessenberry: Income tax cut wrong for state


---- — Here's something that is pretty 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 to cities and townships, again and again. Welfare payments have been cut off for tens of thousands of children from poor families.

There is also 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 modern high-paying, high-tech, new-economy jobs.

So what does the Michigan House of Representatives propose to do about this? Evidently, make sure the state has even less money to spend on essential programs. That may seem ridiculous, but on June 14 the house voted overwhelmingly to lower the state's income tax rate 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. This, even though the state two years ago enacted severe cuts to elementary, secondary and higher education, only a small fraction of which was restored this year.

The situation with the 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 gas 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 road tax. And the House then happily voted 97-13 to starve necessary programs even further.

What were they thinking?

State Sen. Steve Bieda, D-Warren, who served three terms in the House, thinks this was all about election year political posturing.

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

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," by supporting the governor's program of radically cutting business taxes and, for the first time, taxing pension income, something wildly unpopular with many voters.

Once it was clear that the income tax cut bill would pass, most Democrats felt they had no political choice but to support it, too. One who didn't was an indignant State Rep. Vicki Barnett, of Farmington Hills, 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 bill's sponsor is freshman State Rep. Nancy Jenkins, a Republican from rural Lenawee County near the Ohio border. When asked how the state could afford this, Jenkins, a former real estate title examiner, said "this bill is based on expected revenue and will not lead to program cuts."

But that was seen as fairly absurd by perhaps the top expert on the state's economy, Michigan State University Professor Charles Ballard, who, reached in London where he is teaching this summer, 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,'" said Ballard, the author of Michigan's Economic Future.

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," Ballard said. There is, however, plenty of evidence that these tax cuts do 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.

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

The bottom line, he added, is that the tax cuts 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 story.

Jack Lessenberry, who teaches journalism at Wayne State University, is Michigan Radio's senior political analyst, ombudsman and writing coach for the Toledo Blade and former foreign correspondent for and executive national editor of The Detroit News. He was named Journalist of the Year in 2002 by the Metropolitan Detroit Chapter of the Society of Professional Journalists.