Ten steps to boost Michigan’s economy

Added November 11th, 2013 by Pat Sorenson | Email This Entry Email This Entry
Pat Sorenson

new report by the League outlines 10 steps Michigan must take to improve its economy, refuting the myth that tax cuts are a shortcut to economic prosperity. Included in the report are strategies for investing in the services and infrastructure needed to create jobs and fuel economic growth, as well as tax changes that modernize and strengthen the state’s revenue system.

It is an agenda for long-term economic prosperity that includes investments in education from early childhood through higher education, access to the health and mental health services needed for a healthy workforce, basic income security for those who cannot work or find jobs, and support for the community services businesses and consumers rely on.

Also identified are reforms that ensure businesses are paying their share of taxes, an expansion of the sales tax to selected services and Internet sales, and closer scrutiny of tax breaks to ensure that they contribute to economic growth.

By many measures, the last decade was a rough one for Michigan. The state suffered double-digit unemployment rates, and even now, during a period of recovery from the national Great Recession, ranks 4th in the country, with 9% of its residents unemployed.

With the state’s economy still strongly linked to the automobile industry, the loss of the state’s market share in vehicle sales from over 70% in the mid-1990s to less than 45% in 2009 was devastating for many Michigan residents and families, and contributed to rising poverty rates, reductions in personal income, and more pronounced income disparities. And, according to the Senate Fiscal Agency, it is unlikely that Michigan will reach the level of total employment reported in April 2000 (the prerecession peak) again for decades.

While the automobile industry and the national recession were driving the state’s economic decline, policymakers exacerbated Michigan’s fiscal problems through the tenacious and misguided pursuit of tax cuts as the prescription for the state’s ills. The sales pitch for business tax cuts, including the 83% reduction adopted in 2011, was that they would increase the state’s “competitiveness” and create jobs—a belief not supported by the evidence.

In fact, higher taxes are often associated with better state economic performance when they finance the engines of the economy, including effective schools, community colleges and universities; the roads and bridges needed to conduct commerce; police and firefighters; and the libraries, parks and other community services needed to attract and retain a well-trained and educated workforce. Sadly, during this critical decade Michigan reduced investments in public services, effectively shooting itself in the foot to cure a limp.

Michigan cannot afford to lock in the damage to public services that occurred over the last decade, accepting growing school deficits and city bankruptcies, reduced public safety, and crumbling roads and bridges as the “new normal.” There is a path to economic prosperity, but not until our elected officials recognize that tax cuts will not propel us down the right trail.

— Pat Sorenson

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