Tax increase aftermath -- recall threats loom

Democrats and Republicans voted to increase the Michigan income tax and create a service tax component to the sales tax. There isn't a tax in the world that everyone likes. The services to be taxed are presumably non-essential activities, but somehow, greens fees didn't make the list -- a shameless nod to the clout of class in the legislature.

Anti-tax activists in Michigan are freshly emboldened -- they finally have something concrete to protest. And they are threatening recall actions against DINOs and RINOs and even Governor Granholm. But what they are really threatening is to punish legislators who had the guts to break ranks. The Republicans are getting ready to eat their own. Being a proud card-carrying member of the GOP means never breaking ranks, never choosing to acknowledge that still small voice within (unless it's coming from an ear piece at a press conference or during a debate).

The new taxes are not perfect and reasonable small business persons have concerns about administering and collecting the new monies. They also question why some services, but not other obvious choices must bear the new burden. These are legitimate questions that citizens and legislators need to discuss.

But this isn't the debate we're hearing from those hoping to make hay at the moment. Instead of constructive criticism or dialog, opponents offer shrill, combative, politicized rhetoric -- the fuel of negative campaigning.

Here are some articles to check out on the current situation:
Protax votes may carry a high cost Detroit News
Group may fight new state tax on services Crain's
Lawmaker's benefits, pay still could become issue MLive

Partisanship hurts Michigan economy -- both sides in tax debate agree

(cross-posted at Michigan Messenger)

Activists and experts with differing views on taxes agree on one thing: Lansing partisanship hurts Michigan's economic prospects.

Rose Bogaert, chair of the Wayne County Taxpayers Association, has been fighting tax increases in Michigan for 30 years and believes strongly in her cause. "We are way behind other states in terms of economic development partially because we're unable to change things in Lansing. I don't care -- Democrat or Republican -- we need to do something to bring about change in this state," she said.

Some experts believe that bipartisan tax policy -- even if it involves a tax increase -- attracts business because it has more staying power."If you have decisions made on a bipartisan basis, chances are they will be more durable over time and you'll know what the ground rules are for investing in the state over the long term," said Paul Hillegonds, who served as president of non-profit Detroit Renaissance from 1997-2005.

"To the extent that policy is partisan and swings back and forth as the partisan winds change, economic development becomes less predictable. That makes a state very unattractive," said Hillegonds. "In the end, economic development is not a partisan issue."

A number of regional economic development organizations pursue their work without involving state government. "These are bipartisan efforts that include business trying to come to grips with this transformational economy," said David Hollister, executive director of Prima Civitas, a non-profit economic development organization. "They are trying to find ways to wrestle with it outside of the political process."

Prima Civitas works to build collaboration among disparate community groups. Hollister said, "The whole idea is stewardship -- putting the interest of the community first and building collaborations."

"There are so many pieces and it's all based on enhancing the general good and doing it without the legislature. We try to keep them informed, but as far as our strategy it's just not even in the equation," Hollister said.

To be sure, the two sides still differ over taxes. Tax foes argue that higher taxes drive away new business; economic development experts contend that increasing taxes will attract new business investment.

Bogaert and other anti-tax activists believe new taxes enable government waste and that the burden on taxpayers is high enough. They are frustrated and concerned that economically stressed people may face a higher tax burden.

Economic development experts say investment in public infrastructure and talent requires new revenues. "No one is going to invest in a state that does not invest in itself-no one. It's impossible to invest in talent with a cuts-only approach to finances," said Bill Rustem, president and CEO of Public Sector Consultants.

Still, the two sides do agree that the continued political bickering hurts the economy.

Grover Brought the Kool-Aid

Grover Norquist, anti-tax ideologue, is reported to have pitched rebranding the Michigan GOP as an anti-tax party at this weekend's Mackinac gathering. And, reportedly, it met with thunderous applause.

The fiscal situation in Michigan is complex. That is why Norquist's idea can hold sway; it appeals to the intellectually lazy. The economic transformation happening in Michigan is overwhelming. In order to understand this transformation, its relationship to state finance and how to move Michigan to the next place, you have to do some homework. Lots of brilliant people have worked to explain it. For example the Citizens Research Council generously provides a power point presentation on our crisis, updated on September 7, laying out the cold hard facts. (See also: Michigan's New Economy--Basic Reading List)

Let's put this in perspective. Michigan is just a week away from a government shutdown. Certain GOP strategists want a shutdown. This is the ugly side of politics. The people advocating government shutdown are playing politics with the operation of the commons. They have contempt for We the People of Michigan. They cannot be concerned for Michigan's future, only their own electoral prospects.

What's worse, they are being used by outside forces hoping to deliver Michigan to a GOP presidential candidate.

GOP legislators, who tasted and enjoyed Norquist's Kool-Aid, must certainly be ignorant of the fiscal facts in Michigan. How else could they assent to his irresponsible, single issue grunt? It's quick. It's easy. And it's dead wrong.

Today's budget impasse began in 1983

If you thought this mess in Lansing had something to do with the 2008 budget, you would be wrong.

In 1983, on the heels of a budget crisis worse than this one, two Democratic senators were recalled. This action flipped the Senate from Democratic control to Republican control.

Future governor John Engler became the Senate majority leader and ran the GOP as a sort of opposition party. Sound familiar? He then became governor running on a platform of budget cuts and tax cuts. He lived up to his word demanding cuts in spending and taxes for the 12 years he was in office. The legislature borrowed from the right hand to give to the left until there was no more money. In the meantime, the auto industry, our life blood, began to decline-but that's another story.

The important thing is that obstruction and ideological resistance to any revenue increases resulted in GOP electoral success. And this is the point we must remember today.

Mr. Drolet remembers. Recall 1983 is the rallying cry of the Michigan Taxpayers Alliance, headed up by Mr. Drolet. It suggests there can be a glorious reliving of the sad triumph of 1983 and that it would be good and right to pursue recall actions against legislators who vote to increase revenues.

He and his organization categorically oppose tax increases. MTA's board includes Grover Norquist, most frequently quoted as wanting to "drown government in a bathtub." This is called ideology, not public policy.

Institutional memory is a casualty of term limits. No one in the legislature was present for the drama of 1983. But they need to review history to appreciate the drama they're caught in and act intelligently on behalf of our state and our future. Good luck.

A Reminder to Legislators

Several points from February's bi-partisan, Emergency Financial Advisory Panel report titled Michigan's Defining Moment:

"...A convergence of forces has brought about the most serious financial crisis in many years for Michigan’s state and local governments. This is a structural challenge, not simply the result of an economic downturn...We will not economically grow our way out of it. We cannot solely cut or tax our way out of it. Fundamentally, Michigan must reform its spending and taxing and must reinvent the way state and local governments deliver services to be more efficient and productive..."

"After careful study and considerable discussion, this bipartisan panel believes that Michigan

• needs fundamental reform of both spending and taxes;
• must create a modern tax structure that abandons the focus on the economic system of the 20th century and looks to the developing economy of the new century;
• must end the disinvestment in education and those other assets that define the quality of life that knowledge-based workers seek—cultural offerings, natural resources, and vibrant cities; and
• must develop a fiscal plan that includes a combination of revenue increases, spending cuts, and reform of how public services are delivered."

That was the memo from February: a bipartisan plea to work together on behalf of our beloved state. To make cuts and increase revenues. To cut spending and raise taxes. It's not an either /or situation. It hasn't been for months. End the obstruction and get the process moving, please.

Render Unto Caesar

Since before the time of Christ, taxes have plagued us. Presumably, these monies support the commons we all depend on. Our state and local infrastructure depend considerably on property tax revenue. How will declining property values affect revenue? Most Michigan homeowners have been getting a surprise increase in the taxable value of their home on the latest assessment. How can this be?

From The Traverse City Record Eagle, a succinct answer:
"Assessors use sales studies to determine a percentage increase or decrease in property values by neighborhood. State law sets the study period at two years, running from April 1, 2004, through March 31, 2006, for current figures."

Republicans propose some relief...
"Michigan homeowners would never get saddled -- as many are today -- with rising property tax bills in a declining real estate market, under proposed changes to state law and the constitution that state House Republicans plan to announce Monday."

Ironically, the Lord's work can cause a decline in much needed revenue.
A Redford Township church has acquired a $3.65 million "parsonage" causing the township to lose $40,000 annually in tax revenues.

Meanwhile, foreclosures and declining values will also affect revenue down the road.
Michigan was second in the nation in the rate of new foreclosure filings in January (Nevada was first), according to RealtyTrac, a national real estate and foreclosure tracking site. Michigan saw 11,554 new filings, up 147 percent from a year ago.

And property taxes aren't the only concern...
"Less than one-third of Michigan adults support the centerpiece of Gov. Jennifer Granholm's plan to solve Michigan's budget crisis -- a 2% tax on many services and entertainment -- a new Detroit Free Press-Local 4 Michigan Poll shows."