Reversal of Recession

Tax Receipts
Illustration by Timothy Warren

Get ready for class warfare. President Barack Obama wants to raise taxes on successful entrepreneurs and small-business owners. Gov. Jennifer Granholm, who has consistently followed Obama’s lead to date, recently called for a graduated income tax to replace the state’s flat tax of 4.35 percent, one of the most competitive in the nation.

With the nation mired in a recession (seven years and counting for Michigan), raising taxes on small-business owners, who generate the bulk of new jobs, doesn’t make much sense. Already, many state businesses are paying a 22-percent surcharge on the Michigan Business Tax, the result of a fiscal nightmare in the fall of 2007, when Granholm and the state Legislature couldn’t find a fiscally responsible way to streamline an over-bloated government.

That 22-percent surcharge followed a public-relations disaster in which politicians picked and chose different industries to tax, targeting, for instance, golf courses, but not ski resorts.

The big problem here is leadership — or, rather, the lack thereof. Granholm has already said that some federal stimulus money will be used to help shore up the state’s spending problems. But the state routinely moves from one deficit to the next instead of looking ahead and preparing the proper financial budget. If she would only take a cue from Oakland County Executive L. Brooks Patterson, who now forecasts for budgets three years in the future, the state would be much better off (Oakland County has maintained a Triple A bond rating since 1998).

Granholm’s plan to adopt a graduated income tax would mean people making $60,000 or more per year would be subject to higher taxes than people who made less. While the measure would need to get past a wave of lobbyists, skeptical state legislators, and, finally, voters, there’s no escaping the harm such an initiative would create. If enacted, more people would be encouraged to move to other states such as Florida, which doesn’t have an income tax.

In her recent State of the State address, Granholm called for eliminating and merging several state departments as a way to reduce redundant jobs and streamline government. We haven’t heard much about the plan since then, but we need to. If the national economy recovers and Michigan is still mired in a recession, more residents will relocate to regions with job growth. That shouldn’t be the legacy of a term-limited governor who leaves in 2010. Granholm’s legacy, instead, should be a reversal of the recession and putting more people back to work in the private sector.