Tuesday, May 29, 2007

Michigan = France

I heard something on the radio this morning that reminded me just how backwards the Michigan economy is these days. The radio host was talking to the heads of both major state political parties. He said something like:

"now there's a proposal in front of the state legislature to make it so that the big 3 auto makers don't pay any taxes until they make money again. This will help keep them in Michigan. I'm surprised no one's thought of this before."

What?!?! Everyone's thought of this. Nowhere else in America are you taxed when you have no income. Michigan has had what's called the Single Business Tax for years. This is a tax calculated on gross revenue, not on income. So businesses here pay taxes even if they lose money. It has finally been repealed, but now they are looking at replacing it with a "revenue neutral" business tax (read: high tax rate). This will hardly improve the business environment.

And the politicians wonder why the economies of every other state are growing, and Michigan's is not. They wonder why car companies find it cheaper to build in Ohio or Indiana and then entice skilled workers to move there from Michigan. They wonder why the state has a huge budget deficit and unemployment that is almost twice the national rate, and no population growth (0.3%/year).

Confiscatory taxes do not work. This lesson has largely been learned by conservatives (and even many liberals). Ireland has learned it, South Korea and Taiwan have learned it. Even Communist China has learned it to some degree. Only Western Europe - such as Germany and France, and Michigan seem to be behind the times.

When you combine this with the hold the unions have on the state, and the weird things Michigan spends money on (MI is the only state with a state surgeon general), a pattern starts to emerge

Michigan = France when it comes to economics.