NCPA - National Center for Policy Analysis


March 16, 2007

With the recent announcement of Comerica's relocation to Texas, the hemorrhaging of Michigan businesses continues. Astonishingly, instead of taking bold steps to make Michigan more competitive and attract investment, Gov. Jennifer Granholm's plan to end the mass exodus of employers is to raise taxes on them, says Jonathan Williams, economist at the Tax Foundation.

In her State of the State Address, the governor called for "new investment" in the people of Michigan.  Her priorities for this new investment, she said, will be education, health care and infrastructure.  The hope is that higher spending on these initiatives will attract businesses back to Michigan.

But a lack of spending has not been the problem, says Williams:

  • According to Census Bureau data, Michigan spending grew more than 22 percent in inflation-adjusted terms from 1997 to 2004 -- which exceeded the national average.
  • Spending on health care and transportation grew faster in Michigan than any other state in the region.
  • If increasing government spending was all it took to create jobs, Michigan would have all the jobs it needs -- instead of the frightening 7.1 percent unemployment rate.

Quite the contrary, the reason for the budget crisis in Michigan is that spending has outpaced tax revenue.  If the governor wants to raise revenue, then a rational tax system that will attract business investment should be the first step, says Williams.  Extracting heavier sums from the businesses that remain in Michigan will only give them the incentive to follow those that have already escaped.

Source: Jonathan Williams, "Opinion: Michigan can't tax its way to prosperity," Detroit News, March 16, 2007.

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