December 13, 2005

Bizzy’s AM- Coffee Biz-Econ Links (121305): Michigan’s Economy Makes Ohio’s Look Good

Filed under: Economy,Taxes & Government — Tom @ 8:02 am

Michigan’s economy is in bad shape, and the state’s government isn’t helping:

The current U.S. expansion has lifted the fortunes of nearly every state in the country, with the notable exception of Michigan, which is busy reclaiming its 1970s’s title as home of the rust belt. Sad to say, politicians in both parties are only making things worse.

Amid the decline of the Big Three auto companies, Michigan ranked last in income growth last year and was the only state not hit by a hurricane to have lost jobs. United Van Lines reports that more people moved out of Michigan last year than in any year since 1982, when the state jobless rate hit 14%. Today it is 6.1%, well above the national rate of 5%.

Political disarray in Lansing has only compounded the trouble. The year started with some promise, as the Republican-controlled legislature debated broad-based tax cuts to help spur a recovery and aid such struggling manufacturers as Delphi Corp., the auto parts maker. But if you think the Republicans in Washington have bumbled things, take a look at the muddle in Michigan.

On November 30, GOP leaders sent a compromise economic development bill to Democratic Governor Jennifer Granholm. Republicans would get a few business tax cuts — temporary and targeted — in exchange for a $400 million corporate welfare fund that Ms. Granholm could parcel out to her political allies, right on the eve of the 2006 election. The cuts amounted to a 1/750th reduction in the tax burden.

….. How many more Michigan companies have to file for Chapter 11 or flee the state before the politicians in Lansing get serious about a growth agenda? Step one should be to speed up the elimination of the state’s single business tax, which is scheduled to expire in 2009. Michigan has the fifth highest business tax burden in the country, and it is the only state to levy a tax on business production. Delaying tax cuts is like a store announcing a future sale: It provides an incentive to postpone purchases and investment. A cap on the growth of annual spending would also help constrain the political class.

Adding insult to injury, Gov. Granholm’s apparent challenger, current GOP frontrunner Dick Devos, has potential problems that could negatively affect voter perceptions of him and make him unelectable, regardless of whether the issue involved is valid or not.

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