A bill to raise Michigan’s business tax rate from 6 percent to 15 percent — a 150 percent hike — was recently introduced by Rep. John Olumba, D-Detroit. This is both a massive tax hike and a huge expansion of government central planning.
It would discriminate in favor of manufacturers and businesses “primarily engaged in the business of research” by allowing these firms to pay taxes at the current 6 percent rate, as long as an enterprise added at least five new jobs to their payroll in the previous year. Every other kind of business would be socked with such a massive tax hike that many might just close their doors, causing a massive flight of both capital and jobs.
While this bill is almost surely dead-on-arrival in the current Republican-led Legislature (and indeed would face a steep uphill climb in a Democratic-led Legislature that had not uncharacteristically gone totally off the deep end), it’s very introduction cries out for condemnation.
It may also suggest that the “Michigan Alliance for Prosperity” group is on to something with their ballot initiative to require at least a two-thirds vote of the Legislature for any tax hike.
What’s wrong with Rep. Olumba’s bill? First, given its feeble prospects, the bill looks like a PR stunt intended to appeal to a narrow set of voters. Both political parties play this game, which demonstrates how cynical they both really are. It is things like this that give weight to calls for a part-time Legislature and the perennial popularity of legislative term limits.
It also has what might be called a “Zeus economics” feel to it. “Go forth and find a way to hire at least five new people or I — the Lord of Sky and Thunder — will hurl my tax thunderbolt down from Mount O-Lansing-pus, destroying you with a 150 percent increase!” A different analogy might be King Canute ordering the tide to rise and bring in a new crop of jobs.
I don’t mean to pick on Rep. Olumba (who in his last batch of bill introductions before this one had a few that were constructive, creative and probably much more sincere), but Mackinac Center analysts have for decades decried state government’s desire to centrally manage job creation. Just as government subsidizing jobs is a bad idea, punishing those who do not create them according to Lansing dictates is also wrong.
In addition to all that “picking winners and losers,” Michigan’s economy is only just beginning to recover from its “lost decade” with some tentative economic growth in the face of significant headwinds. The message a bill like this sends is detrimental to that trend.
And while this bill may be DOA, other tax hike proposals also threaten the state’s creaking recovery, not least of which was Gov. Rick Snyder’s attempt earlier this year to impose a huge hike in the state’s fuel and vehicle registration fees. (Though, at least that hike was for infrastructure improvement that many see as within government’s scope.)
More recently, there is GOP Rep. Bill Haveman’s scheme to help locals impose “neighborhood enhancements” property tax hikes. (See Lansing Builds a ‘Scaffolding for Plunder’ and Scaffolding for Plunder Part II.)
Here’s some free advice to Reps. Olumba and Haveman, and to the gas tax devil that appeared to ride Gov. Snyder’s shoulder for a time last winter: Let’s just call the whole thing off.