Last week, Gov. Jennifer Granholm introduced the final budget of her tenure. She proposes spending $2.1 billion more than the current year, and requests a $554 million net tax increase for fiscal 2011. The tax hike comes from immediately increasing the tax burden on consumers by expanding the sales tax to services, while gradually implementing a reduction in business taxes.
This net tax hike would ensure the health of state government at the expense of families and business owners.
The reality is we can't afford it. Michigan residents are struggling and the last thing they need is for state government to reach deeper into their pockets. They already have to support a greater share of government employees, as illustrated in the accompanying graphic. By raising taxes, Gov. Granholm is arguing that it should stay that way.
This is the Detroitification of Michigan: Hollowing out the private sector to prop up an unsustainable government establishment. An establishment that at both the state and local levels is unresponsive and costs too much for the services it delivers. The governor implicitly has acknowledged some excessive costs by calling for some reforms, but those reforms amount to half measures. Bolder solutions are necessary.
Gov. Granholm's tax increase will only exacerbate the ugly economic trends that have characterized this decade in Michigan by once again raising the cost of living here. She and the rest of the political class did it three years ago when they hiked taxes on families and businesses by $1.4 billion, promising that the extra money would put Michigan on sounder financial ground.
Of course it did just the opposite, but the measure nevertheless did serve their real goal: It allowed them to postpone the real government reforms that everyone knows this state has needed for years. It should also be noted that unemployment in Michigan increased 100 percent after that tax hike took effect.
Could there be any clearer evidence that this class cannot be trusted when today they return asking for more? Here's the only appropriate response:
No. Not a single tax change — even one that appears perfectly revenue neutral — until state government gets its own spending under control and makes other fundamental reforms to the public policy landscape of this failing state.