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Snyder’s plans aren’t as new as they seem

Michigan Morning Sun, 5/20/11

BY: ERIC BAERREN
Michigan Morning Sun
Friday, May 20, 2011

Back in 2007, the Mackinac Center produced a report about how the state could address its budget deficit without raising taxes. As you might expect from a rightwing think tank, their solution was all cuts. Some of the cuts involved programs for which the state receives matching dollars from the federal government and some of the suggestions like cutting health care benefits for teachers were entirely unrealistic (teacher benefits are a product of negotiations at the local level).

After tallying up all those cuts, there was still a huge gaping hole in the state budget, left by repealing the Single Business Tax without replacing that revenue. The Mackinac Center's proposed solution? Leave it alone. It would fill itself.

Luckily, in a flash of rare sensibleness, our elected officials at the time chose to ignore that suggestion. It wasn't really a serious suggestion in the first place, mostly just aimed to provide public cover for people who preferred ideologically motivated stubbornness to addressing budget problems.

Fast forward four years, and the first thing our new executive did was dust off the Mackinac Center's suggestion and make a go of it. Oh, it wasn't an exact duplicate, but it started with the same idea, reducing business taxes, and ended with a similarly sized deficit.

Despite what we've been told by the adult media, the ideas under which the Snyder administration have operated are not particularly new or even fresh. They are the same basic ideas that we've been hearing for the last 30 years. The difference is that he's a political newcomer who doesn't wear a tie, so the things he says are treated as if they're new.

That is, except for a shift in the goalposts of what outcomes we ought to expect. For 30 years, it's been reducing taxes creates jobs. That's apparently no longer the case.

Driving the shift were uncomfortable points raised during the short but intense debate in Lansing over ending the income tax credit on pensions. A small handful of Republican senators, opposed to taxing the incomes of old people, asked pointedly (and rhetorically) how many jobs would be created by taxing the incomes of the elderly to finance a cut in business tax burden. Old people tend to vote in high numbers, so you can understand the hesitancy of some to enrage that demographic. Ultimately, the governor, who claims to do everything based on data, said he had no data on tax shift job creation. This was buoyed by the head of the House Fiscal Agency, a legislative research arm that provides analysis of bills, who called the idea of specifically enumerating job creation from the Snyder tax shift unrealistic. Okay, he was a bit more harsh. He called it "nonsense."

There's probably good reason for that. Job creation isn't actually driven by tax rate. A business doesn't look at its tax bill and say, "Hey, a break, we can hire more people." Businesses spend money on employees for another very good reason, because demand for their service is high enough and the productivity of their employees is such that it is warranted. Otherwise, smart businesses contain costs. Put another way, a business owner who hires primarily out of the goodness of his heart is probably headed to bankruptcy court.

Now, the goalposts rest in vague country called "business friendly environment." It's like pornography. No one can define it, but they know it when they see it. I assume it has something to do with declining unemployment and increasing state tax receipts.

We have both of those currently. Economic recovery is under way, albeit small and fragile, kind of like the smoking kindling of a fire in the middle of a stormy night. Joblessness is declining and just this week economists gathered and projected a friendly increase in expected state revenue figures. Now, the talk in Lansing is what to do with a surplus of about $400 million. All of this predates the governor's tax shift, by the way. Continued... <?viewmode=2>

Don't get used to surpluses, because they've already been spent. They were spent in the governor's budget as a tax cut for business, not to create jobs but to create a business-friendly environment. So, he spent it on business climate porn. Rick Snyder is doing to Michigan what George Bush did to the United States of America - took surpluses that he had no part in creating and spent them on tax breaks for wealthy people. I will decline further comment on how that has turned out.

As to what this will mean for you, the individual, I really can't say. What I can say is that virtually everyone agrees that it's not certain that it'll actually create additional jobs. Except for one party. This last week, the Mackinac Center issued a report that apparently concludes that the Snyder tax shift will immediately create bushels and bushels and bushels of jobs. That you may file under "Remember the time that you told us that a budget deficit would fill itself?"

Eric Baerren is a Morning Sun columnist. He can be found at www.michiganliberal.com and can be reached at ebaerren@gmail.com.

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