A Single-State Recession
The number of jobs (nonfarm, not seasonally-adjusted) added to the US economy since 2004 numbers around 6 million.
But over the same period, Michigan has lost over 50,000 jobs. What’s going on?
A relative of mine recently described to me the situation from his perspective. His company has an office located in Michigan, and of the rather modest net profits accrued by the Michigan location, over 56% were paid to the state by means of the Single Business Tax (SBT).
The SBT has now been phased out going forward, but there’s been a huge partisan battle between Republicans in the state congress and Democratic Governor Jennifer Granholm about what to do. The debates are well-chronicled on the Democratic side by the ranking Democrat on the Senate Appropriations Committee, Senator Mickey Switalski (see, for instance, the Feb. 23, 2007 edition of his newsletter, The Insider).
It looks now like the new tax policy replacing the SBT will be “revenue neutral,” in large part because the state was already facing a $1 billion budget deficit before the SBT was to be phased out. Besides the punitive SBT, many blame the employment climate in Michigan on the state’s “heavily unionized culture.”
The “revenue neutral” nature of the new tax plan seems to indicate to me that businesses in Michigan can continue to expect big chunks of their profits going to the state’s coffers. And that can only mean that Michigan’s single-state recession will continue, even if the tax penalty for adding payroll is modified under the new plan.
But over the same period, Michigan has lost over 50,000 jobs. What’s going on?
A relative of mine recently described to me the situation from his perspective. His company has an office located in Michigan, and of the rather modest net profits accrued by the Michigan location, over 56% were paid to the state by means of the Single Business Tax (SBT).
The SBT has now been phased out going forward, but there’s been a huge partisan battle between Republicans in the state congress and Democratic Governor Jennifer Granholm about what to do. The debates are well-chronicled on the Democratic side by the ranking Democrat on the Senate Appropriations Committee, Senator Mickey Switalski (see, for instance, the Feb. 23, 2007 edition of his newsletter, The Insider).
It looks now like the new tax policy replacing the SBT will be “revenue neutral,” in large part because the state was already facing a $1 billion budget deficit before the SBT was to be phased out. Besides the punitive SBT, many blame the employment climate in Michigan on the state’s “heavily unionized culture.”
The “revenue neutral” nature of the new tax plan seems to indicate to me that businesses in Michigan can continue to expect big chunks of their profits going to the state’s coffers. And that can only mean that Michigan’s single-state recession will continue, even if the tax penalty for adding payroll is modified under the new plan.
Comments
#1 2007-06-05 12:14 (Reply)
So we will just have to see what we can do about getting the “Fair Tax” implemented.