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Business > Politics and Prejudices

Case for a czar

Can Charles Ballard and progressive taxation fix Michigan's screwed-up finances?

Charles Ballard
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Published 3/18/2009

Believe it or not, there really is a condition called Persistent Sexual Arousal Syndrome, according to a friend who studies medical websites. The story she sent me said there was no known cure for women afflicted by "this nightmarish curse," although it is unknown if anyone has tried sending sufferers the drawing of me that accompanies this column.

Alas, I don't own the rights to that caricature, but I do to my words. And in the interests of sufferers from PSAS everywhere, I thought I would offer you a sensible, well-written suggestion for improving the Michigan economy instead. So if the following column doesn't turn you on, you are probably not named John Maynard Keynes. Which, come to think of it, is a good thing, since he, like all of us in the long run, is stone cold dead.

Now to get serious: Not to put too fine a point on it, but the economy is a mess. More of a mess, in fact, than we really know. We won't really see the full effects of it till this fall, when the next budget year starts. Official projections are that this budget has a $1.5 billion hole in it, which means the state will have that much less than they expected. What's that mean? For one thing, they are going to have a lot less to spend on education than they thought. Can you say bigger classes, fewer teachers, crummier facilities, schools falling apart?

Can you say fewer professors and much higher tuition at state colleges and universities? You bet your sweet bippy. And now for the bad news, as Reichsminister Joseph Goebbels said as the Soviet tanks were closing in on Berlin. The bad news is that the old bad news — the $1.5 billion deficit — was probably wildly optimistic. Money coming into the state in February was more than $100 million less than had been expected. That's something, in fact, that shouldn't be all that surprising. More and more of us are losing our jobs, and fewer and fewer people are buying cars. My guess, as a patriot and a Christian, is that the final deficit number is apt to be more like $2 billion.

That means slashing everywhere. What is needed, of course, is new business coming in, creating jobs, putting people to work. But we've managed to screw that up too. Not only are the times tough, our elected leaders made it a lot harder to attract new business two years ago.

First, they replaced the old Single Business Tax with a new Michigan Business Tax. As far as I can tell, the MBT was a slight improvement overall. While it rewarded the old dying automotive firms too much and the modern growing high-tech firms too little, it stopped the SBT's nutty practice of punishing employers for adding more workers.

Quickly, however, the politicians ruined it. Two years ago, when they didn't have the guts to raise the income tax enough to balance the budget, they did something really stupid: slapped a 22 percent surcharge on the Michigan Business Tax. That helped make sure we'd avoid the possibility of anyone bringing any of those nasty new jobs to our state.

Now — surprise surprise — things are worse than ever, and the part-time real estate peddlers, retired teachers, and not-very-good lawyers in our newly incompetent, term-limited Legislature haven't a clue what to do.

But there is somebody who does.

Michigan needs an economic czar right now, and I have a nominee for the job: Charles Ballard, a professor at Michigan State University who is the expert on our state's economy; he wrote a recent, and very readable book called Michigan's Economic Future. He is also, by the way, not an ivory-tower type but a down-to-earth human being struggling with the same sorts of things — kids and relationships and life — most of us are.

He knows a way to solve the deficit problem, pay the state's bills, give poor people a tax break and attract new business to Michigan: pass an amendment to the state Constitution to adopt a graduated income tax for the citizens, rather than the flat-rate we have now.

Flat-rate taxes fall much more heavily on the poor. Daniel Loepp, the head of Blue Cross/Blue Shield of Michigan, got paid $1.8 million last year. (Blue Cross is officially a charity, another symptom of how screwed up things are.) Loepp pays a Michigan income tax rate of 4.35 percent.

Now take Joe Slackerboy, who is actually an ambitious young man who, because of the economy, could only find a job unloading boxes part time. Slackerboy, a made-up name but a common situation, made $17,000, and pays an identical Michigan income tax rate of 4.35 percent. Does that strike you as fair? Do you think both can afford the same rate?

You know better. But the Michigan Constitution was written by Republicans dead-set against a graduated income tax like the federal one, a tax that then had much higher rates for the rich than the starving, thanks to old communists like Franklin D. Roosevelt.

They made it so we'd have to pass a constitutional amendment to change things, which actually, is not that hard, especially if the Legislature puts one on the ballot. If not, it isn't even that hard to get an amendment on the ballot with a simple petition drive, if you raise a little money.

Ballard's idea is to do it, and then eliminate the business tax entirely. Yes, rich and upper-middle income folks would pay more. By the way, before you yap, O right-wing critics: This columnist would almost certainly pay more as well, and I think I should.

But the state would be far better off, depending on where the tax levels were set. We could essentially solve education funding for both our colleges and our elementary and high schools, while becoming much more business friendly. Heck, we wouldn't even have to eliminate the entire MBT — just reduce it to a sensible level far below that of most states.

You can tell this is a good idea because it was immediately opposed by the Michigan Chamber of Commerce, which, as far as I know, is still opposed to statehood and child labor laws. That's because some small businesses manage not to pay any business tax at all, but instead pour all of the profits into the salaries of the top officers of the company. Nice.

But wonder of wonders, the place that is normally the dark tower of reaction, Senate Majority Leader Mike Bishop's office, didn't automatically oppose the proposal. It still may, but if the parties could agree on a proposal like this, it could really give our economy a fighting chance.

That might also give you, or your kids, a future in this state. Because it doesn't look like there is much chance of that now.

Check Out: The Center for Michigan just released a devastating new report, "School Daze: Michigan's Shrinking School Year." The study shows that almost none of our districts hold classes for even 180 days a year. Meanwhile, South Korean kids go 255 days. A) Is our students learning? (as the chimp liked to ask.) B) Why is other countries beating us? Answers at your unemployment office.

Jack Lessenberry opines weekly for Metro Times. Contact him at letters@metrotimes.com.

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