NCPA - National Center for Policy Analysis

MICHIGAN NEEDS REAL REFORM

April 2, 2007

Michigan residents are clear that they don't support tax increases to fix the state's budget deficit, but for some reason that hasn't sunk in with some state leaders, says the Detroit News.

House Speaker Andy Dillon (D-Redford Township), says he is working on a plan to shave about $500 million of the state's $940 million budget shortfall by fundamentally changing the state's utility market.  Details aren't yet available, but according to reports:

  • The plan is expected to place a 6 percent tax on the electricity (and potentially natural gas) that utilities sell.
  • It would eliminate personal property or business equipment taxes on firms to offset the increased costs they will likely face from the utilities passing the tax on to them.
  • Utility companies would still pay personal property taxes, but customers would get no relief.

Stability in the market, Dillon says, would provide incentives for utilities to build new base power plants, which ultimately could reduce costs.  But ultimately, it will be consumers who will bear the burden of utility tax increases, says the News.

So instead of Gov. Jennifer Granholm's plan to put a 2 percent tax on services, Michigan residents get what amounts to a tax on everyone who pays for electricity.  Given the state's already suffering economy and continued hostility toward businesses, it's hard to see how such a plan would be a recruiting tool for building new facilities, says the News.

Source: Editorial, "Dump new tax schemes in favor of real reforms," Detroit News, March 30, 2007.

 

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