Loss of Jobs, Outdated Tax Structure Make Michigan Among Poorest States

by Douglas M. Paterson, MPA, Director of State Policy, Michigan Primary Care Association

In a report just released by the Pew Center on the States*, Michigan was highlighted as one of 10 states along with California (who is in a league of its own having  the 8th largest economy in the world and whose deficit of $43 million is the same size as Michigan’s entire budget) whose current troubles will have dramatic consequences for their residents: higher taxes, layoffs and furloughs, longer waits for and elimination of public services, more crowded classrooms, higher college tuition,  and less state support for lower income residents.  The report says that Michigan’s fiscal situation is expected to worsen even when the national economy recovers.  Federal stimulus money that is helping to cover some expenses will start running out next year.

What’s more, when the federal Bureau of Economic Analysis releases finalized 2009 data, Michigan is expected to be among the 10 poorest states in the nation.  Projections are that by the end of this decade, Michigan will have lost 1 million jobs.

One of the major problems cited by the report is that Michigan’s tax code exempts some of the most prosperous segments of the economy.  Special tax breaks are offered not only to retirees but also to companies wooed to the state. In addition, few services are subject to sales taxes.   For this reason, the state’s taxes combined grow at only about half the rate of personal income. Michigan offers 6.3 billion more in total tax exemptions, credits and deductions than it actually collects in taxes.

The Pew Center on the States’ report simply reinforces what we at Michigan Primary Care Association have been supporting for the past two years—elected officials must address the fact that:

  • We must reform and consolidate government, creating a “new normal”.  The prosperity that Michigan has enjoyed for the past 50 years is over and we will have to consolidate departments,  operations, services, and adjust how state and local governments operate. 
  • We must update our tax structure to include a graduated income tax and a tax on selected services.
  • We must re-examine the tax exemptions that have built up over many years, evaluate them for cost effectiveness, and eliminate those that don’t save the state money.
  • Replace elected state officials who fail to address these remedies.

 For a copy of the full report go to www.pewcenteronthestates.org.

 *An independent nonprofit, Pew is the sole beneficiary of seven individual charitable funds established between 1948 and 1979 by two sons and two daughters of Sun Oil Company founder Joseph N. Pew and his wife, Mary Anderson Pew.  The assets of these trusts totaled $5.2 billion at the end of June 2008.  In fiscal year 2009, Pew will invest about $280 million in initiatives to serve the public interest.

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