Americans for Prosperity-Michigan

Taxes

Taxed Out?
High taxes adversely affect a state’s economy. All other things being equal, states that have high taxes create less wealth and see lower rates of economic growth.

This chart illustrates that though Michigan’s business tax climate is better than the median for taxes in the Great Lakes, the region on average is higher than the rest of the country. It is significant to note Michigan’s abysmal corporate tax and unemployment insurance rankings and to compare that to its GDP and private sector job growth.

These rankings matter. The ten states with the best tax climates from 1997 to 2007 gained 2.3 million residents, while the ten states with the worst tax climates lost 3 million. Because of these shifting populations over the same period, the best tax climate states gained $88.7 billion in real income, while the worst states lost $82 billion.

Corporate taxes in Michigan are the third highest in the country. High businesses taxes deter business investment and entrepreneurship in Michigan. This high tax burden will continue to drive manufacturing jobs, including automobile manufacturing, out of the state and into lower tax, lower regulation states. It will also discourage high-value added service jobs in sectors like finance and information technology from locating in Michigan. Given the economic woes facing Michigan with the evolving economy and outsourcing, high tax rates are very detrimental.

In 2007, Michigan replaced its much-maligned Single Business Tax with the Michigan Business Tax (MBT). The MBT was advertised as helping to “set Michigan on the path to economic recovery.” Unfortunately, it did no such thing. It resulted in increased revenues for the state of Michigan and in turn a greater burden on Michigan businesses. More disturbingly, the MBT failed to eliminate the gross receipts tax. Gross receipts taxes are highly distortionary, resulting in the repeated taxation of complex products as they move through the economy. This should be of particular concern in a state like Michigan, which is focused on producing complex manufactured goods.

In order for Michigan to compete, pro-growth tax cuts are a must for the health of our long-term economy. To relieve the tax burden on Michiganians, AFP supports:
-A tax cut package to aid the growth of the Michigan economy, which includes a lowering the individual income tax, the corporate income tax, and the state sales tax.
-Requiring a legislative super-majority to increase taxes.
-Limiting the property “pop up” tax.