Sunday, November 14, 2010
Taxation
The Governor elect is proposing a re write of the corporate tax in Michigan--The Michigan Business Tax. He is proposing to go to a corporate income tax with a rate of 6%. Some are saying that will cut state revenue by over $1 billion when the state will have a $1.6 billion deficit next fiscal year. Good idea? Other ideas? Does not seem to any support for a tax increase, so there will need to be budget cuts and program reductions.
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I always get annoyed that government seems to never think long term, and I know that is how Snyder is looking at it, but it's just not the time for that. I think that we'll do fine if we keep supporting the companies that are already emerging here, and working to make sure our graduates stay here instead of going to other states. Right now there's such a great energy surrounding Detroit. The companies behind that movement aren't in Michigan for the money, they're there for the social reward. That's the sort of mentality that is going to grow Michigan.
ReplyDeleteI agree that some of these movements shouldn't be about money, but I also know how hard it is to have a business in Michigan. My dad runs a business in the Upper Peninsula and he did it for that social reward and working to help the Upper peninsula to have more high paying jobs, but at the same time its a constant struggle between the social reward and the harsh reality that is it is expensive and hard to have a business in Michigan, and that makes it hard to want to stay in Michigan even if you have the good intentions of the social reward.
ReplyDeleteAs per Ivana's post, I'd have to agree that it's frustrating to have a government that is so focused on the short-term.
ReplyDeleteI know we have a long way to go in terms of economic growth,and the confusing mess that is the Michigan business tax system doesn't help.
Basically, I think that Snyder's idea is okay, but it's kind of a lose/lose situation either way. If we lower taxes, Michigan loses revenue in the short-term and must find some way to balance the budget otherwise. In the long term however, businesses will be attracted to Michigan for it's business friendly environment, thus growing the economy.
On the flip side, if we raise taxes or keep them the same, we are better able to balance the budget in the short term. But in the long term, economic growth might suffer. Although it is business's that get taxed, it is their employees that feel the pain, in the form of pay-cuts and layoffs. Ultimately, the consumer endures the repercussions in higher costs for their goods.
Then, let's help that business in a different way. What I'd love to say is that if the state picked up health care it would make business a lot easier, but I know there's no way that's going through. Nonetheless, those are the kinds of supports I would argue are better. This way, everyone is benefiting from the policy, not just business. However, I know America stands on ideals of freedom, and the idea of freedom to use money as you would like to, so by not giving back money but instead taking the money as taxes and doing something with it is less freedom. Maybe not health care, but something that provides a benefit for the whole community (or city, or state), not just the business itself.
ReplyDeleteKaley's post makes some good points about the debate about raising or not raising the corporate income tax. It is true that having a lower relative corporate income tax compared to other states will create an incentive to bring businesses to Michigan and retain the existing businesses in the state. If the governor is going to cut corporate income taxes then there must be a way to increase revenues or then the state must cut essential programs or cut higher education funding. Cutting these services would be disastrous. If the governor plans on cutting the corporate income tax to create an incentive to bring more businesses here, he should also then raise the personal income tax to help offset the costs of the corporate income tax decrease. I don't think rich people can make the argument that the state income tax is such a burden that they have to move to a different state, whereas a business may be able to make that argument.
ReplyDeleteIt is very interesting to see the extremely hard dilemma with this question. Although I think that this strategy is a valid idea, it also must be taken into consideration that we have to make up for the revenue somewhere. I don't think this plan will work if it is not passed along with some sort of revenue increasing program rather than just cuts. I think an increase in the sales or income tax (maybe even both) would be necessary to balance this proposal.
ReplyDeleteMaybe problems like this need to be looked at from a completely new level. I really agree with one of Ivanna's first comments. Keeping graduates in the state could be another way to increase jobs and productivity. If we just focus on making the status quo better and don't implement any new ideas I believe we will face more problems down the road.
To truly fix the problem of state revenue shortfalls, the state must take a long-term approach, not a short-term fix that will only slow the bleeding, not curing the cause of the bleeding. Education must be looked at as an investment, not an expense. Investments in education will pay themselves off in the future and more, one only needs to look at the economic effect of the G.I. Bill on American economic growth. If the state keeps on making cuts to education, the state will never be able to recover economically and will never be able to cure the state's structural deficit.
ReplyDeleteI agree that this year isn't the time to have cuts, but it might work in the future. Make the Michigan economy for corporate businesses attracting with a 6% tax. This will increase jobs, revenue on tax from other taxes and business. In doing this, Michigan will be able to retain educated college graduates and people with money in their pockets to invest in the Michigan economy.
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