The MC: The Mackinac Center Blog

So Long Film Subsidies

Other 'economic development' programs should be next

The state will no longer offer new film productions taxpayer money to shoot movies in Michigan. This is an incredible development considering that film incentives passed with only one dissenting vote just seven years ago. Now that policymakers have acknowledged some limits on profligacy in the name of economic development, there are other programs that ought to be reviewed as well.

A few contenders immediately come to mind.

The 21st Century Jobs Fund programs have constantly changed strategies since its creation in 2005. The programs have made early-stage company grants, battery plant subsidies, matching fund grants, incubator assistance, mezzanine financing and others. The state’s current programs include developing an “entrepreneurship eco-system.”

Results have never met expectations — former Governor Jennifer Granholm mentioned that we’d “be blown away” — and these programs continue to drain state cash.

While those Pure Michigan commercials might instill some sense of state pride among our residents, they represent the state purchasing an entire advertisement campaign for a single industry. The beneficiaries get free marketing, but taxpayers stuck with the bills get no returns.

The Michigan Community Revitalization Program offers grants to real estate development. These projects already involve private money and legislators should be skeptical that giving tax money to develop residential and retail space is an effective way to grow the economy.

The state is no longer offering Michigan Economic Growth Authority credits, but the deals that were made will continue to cost state taxpayers billions. Legislators ought to investigate ways to roll back those liabilities, like revisiting whether these credits should remain refundable. The refundability of these credits when the credits are worth more than the company’s tax liability makes these credits a subsidy from other taxpayers.

At its core, the economy is about people working together to meet their wants and needs. The state government sometimes intervenes by taking money from some and giving it to others under the guise that it knows best how to generate greater economic effects. Policymakers acknowledged that this was ineffective for the film industry and should apply that same thought to other areas where the state decides whose money should go where.

July 24 MichiganVotes Weekly Roll Call Report

Proposals to repeal right-to-work, expand licensure mandates, more

The House and Senate are out for several weeks. Therefore, this report contains several recently introduced bills of interest.


Senate Bill 197: Pro-rate Michigan's electoral college presidential votes

Introduced by Sen. Dave Hildenbrand (R), to end the current winner-take-all system of allocating Michigan’s presidential electors, and instead pro-rate the state’s electoral college votes on the basis of the state’s popular vote totals. Referred to committee, no further action at this time.


Senate Bill 199: Expand "bottle bill"

Introduced by Sen. Rebekah Warren (D), to expand the state “bottle bill” deposit requirement to include water and all nonalcoholic carbonated or noncarbonated drinks sold in an airtight metal, glass, or plastic container that holds one gallon or less, except for milk and unflavored rice or soy milk, with some additional exceptions. Referred to committee, no further action at this time.


Senate Bill 212: Impose licensure on genetic counselors

Introduced by Sen. Judy Emmons (R), to impose licensure, fees, certification through a nationally recognized certifying agency, and more on “genetic counselors” as they are defined in the bill. Referred to committee, no further action at this time.


Senate Bill 243: Prohibit working seven days a week for same employer

Introduced by Sen. Hoon-Yung Hopgood (D), to mandate that employers must give employees “at least 24 consecutive hours of rest in every calendar week,” with some exceptions. The bill would also impose a related record-keeping mandate on employers. Referred to committee, no further action at this time.


Senate Bill 262: Repeal Right to Work law

Introduced by Sen. Hoon-Yung Hopgood (D), to repeal the state’s right to work law for government employees. Specifically, the bill would allow a public school or government agency to enter an agreement with a union under which employees would be required to pay “agency fees” to the union as a condition of employment, at a level equal to full union dues. Referred to committee, no further action at this time.


Senate Bill 289 and House Bill 4587: Authorize sanctions for bad faith patent infringement claim

Introduced by Sen. Margaret O'Brien (R) and Rep. Mike Callton (R), respectively, to authorize damages for the target of a patent infringement claim that is made in bad faith. Damages of up to $50,000 or triple the actual loss would be authorized, plus legal costs. If the target demonstrates a “reasonable likelihood” that the claim is made in bad faith then the court could order the claim seeker to post a bond equal to the target’s likely legal expenses. Referred to committee, no further action at this time.


Senate Bill 224 and House Bill 4351 Impose lobbying moratorium on former lawmakers

Introduced by Sen. David Knezek (D) and Rep. Gretchen Driskell (D), respectively, to impose a two-year moratorium on lobbying by a former member of the Michigan House or Senate, or a former governor, lieutenant governor, attorney general and Secretary of State. A one-year moratorium would apply to former state department heads. Referred to committee, no further action at this time.


House Bill 4394: Let local school districts hire qualified teachers without state certification

Introduced by Rep. Gary Glenn (R), to permit local school districts to hire a teacher who has not gone through the official state teacher certification process but who is considered “appropriate and in the best interest” of the students due to “a combination of education and experience.” Referred to committee, no further action at this time.


House Bill 4402: Create government task force to reduce government red tape

Introduced by Rep. Andy Schor (D), to appoint a task force of representatives from various interests and governmental institutions to review state reporting requirements for public, private and charter schools, and recommend which could be eliminated or streamlined. Referred to committee, no further action at this time.


House Bill 4411: Make domestic violence victims civil rights law "protected class"

Introduced by Rep. Sam Singh (D), to add domestic violence, sexual assault or stalking victimhood to the characteristics that define membership in a protected class against whom it is a crime to discriminate in matters of housing under the Michigan civil rights law. This would make it a civil rights violation to deny housing to a person who happens to be a victim of these crimes. Referred to committee, no further action at this time.


SOURCE: MichiganVotes.org, a free, non-partisan website created by the Mackinac Center for Public Policy, providing concise, non-partisan, plain-English descriptions of every bill and vote in the Michigan House and Senate. Please visit http://www.MichiganVotes.org.

Labor Reform Not a Death Knell for Legislators After All

Timeline shows reformer success in later elections

Labor Reform in the States

"There will be blood. There will be repercussions." Such is the common threat made against those who dare take on the union juggernaut.

Michigan’s State Rep. Shenelle Jackson (D-Detroit) made the threat clear in 2012 during the passage of that state’s law on worker freedom. "What you're doing today will only serve to empower [Democrats]. We will win back this chamber, possibly take the Senate back and certainly win the governorship.”

Unfortunately for Rep. Jackson and her allies, the exact opposite happened. Not a single state representative or senator who voted for right-to-work lost in the general election and the Republican governor, Rick Snyder won re-election.

Since Michigan has the ballot initiative, unions could have gone straight to the voters with a canvassing campaign to put a repeal on the ballot. They did not. And right-to-work was such a nonissue in the 2014 election that during the one debate that happened, neither candidate brought it up, and the only time it was mentioned, it was as a sub-part of another issue.

A new interactive timeline from the Mackinac Center for Public Policy, “Labor Reform in the States,” shows that Michigan’s experience is common to the states that have recently passed reforms. 

The timeline examines labor reforms from 2011 to 2014 as well as the subsequent elections in Midwestern states long considered union strongholds.

Despite massive protests and threats from unions and the politicians they support, brave elected officials that backed reforms almost universally won re-election.

The election after Indiana passed right-to-work, Republicans picked up nine seats in the Senate and did not lose any in the House. Gov. Mitch Daniels, who signed the worker-freedom law into effect, did not return to office; being term-limited, he could not be on the ballot. Another Republican, Mike Pence, replaced him.

Wisconsin saw perhaps the largest protests against government union reforms when, in 2011, Gov. Scott Walker signed Act 10, which strongly curtailed government union privileges. State and national union attempts to undo the reforms and unseat Walker failed miserably.

From 2012-2014, Walker won both a recall and general election. Republicans keep majorities in both the Wisconsin State Assembly and the Wisconsin Senate. In several smaller elections that were considered referendums on Act 10, voters refused to send politicians to Madison to undo it.

In Ohio, the same voters who repealed Gov. John Kasich’s Senate Bill 5, another bill that would have curtailed government union privileges, re-elected him, and kept Republican majorities in both the House and Senate.

Reformers winning cannot be dismissed as Republicans getting lucky in a few wave elections.  For at the same time voters were siding with reformers and electing Republicans to state offices, they were also sending Democrats to Washington and supporting President Obama.

The lesson from the victories of elected officials who took on big labor over the last few years is clear: Voters will side with those that support pro-worker and pro-taxpayer policies.

 (Editor’s note: A version of this article appeared on the Illinois Policy Institute Blog.)

The Rise and Regulation of Craft Beer

Comparing Michigan to competitors in the microbrewing game

Michigan’s recently-deceased film subsidy program showcased the lure of the California dream — movie productions dotting the state, creating economic miracles everywhere they appeared.

That particular vision did not come to pass, but there are better ways Michigan can meet, emulate or exceed California’s achievements and industry. After all, Michigan has more coastline, more fresh water and more craft breweries per capita than the Golden State.

Michiganders aren’t alone in noticing and capitalizing upon the rise of craft brew. According to the Brewer’s Association, a group that promotes the interests of craft brewers, only the District of Columbia and Oklahoma saw their number of craft breweries fall between 2013 and 2014. Nevertheless, Michigan makes the top ten in a couple metrics that mean a lot: sixth in the number of breweries (159 in 2014) and tenth in economic impact ($1 billion in 2012).

California comes in at number one on both lists, multiplying both Michigan’s economic impact and total number of breweries roughly by four. Michigan probably can’t beat those numbers, but it doesn’t have to — a terribly scientific ranking of the 50 states (“definitive and final,” according to Thrillist.com) recently rated Michigan number one, based partly on the close proximity of craft brewing power-houses Bell’s and Founders. Grand Rapids recently began marketing itself as “Beer City.”

Clearly, the craft brewing industry is doing well — but it could be even better. Reducing the regulatory burden the state imposes on craft brewers could create even more economic activity and better marketing for the state as a whole. Compared to the states above it on the Brewer’s Association economic impact rankings, Michigan charges high licensing fees compounded by high excise taxes. Most of these states strike a balance between the two, with high licensing costs and lower taxes, or vice versa. Michigan, meanwhile, has the third highest taxes and the third highest potential licensing fees of the top ten.

A microbrewer in Michigan who produces 25,000 barrels a year will pay $1,000 for his annual license. He must also pay $6.30 in excise tax for each barrel, for a total of $158,500. In Ohio (which ranks eighth in the country with $1.1 billion in economic impact in 2012), the licensing fee would remain the same, but the tax on each barrel would be only $5.58 — $18,000 less than Michigan. And in Colorado, the same license would cost just $300, and each barrel would require only $2.48 in excise taxes. For those keeping track at home, that’s an annual excise tax and licensing burden of just $62,300. Small wonder Colorado has so many microbreweries per capita and $1.5 billion in annual economic impact.

Perhaps a bigger burden on Michigan’s craft brewers is the state’s beer and wine wholesaler monopoly. The law states that craft brewers may market and transport their product directly to restaurants and stores, but only if they produce 1,000 barrels a year or less. Once a microbrewery exceeds that limit, it must contract with a wholesaler to transport all of its products – a closed market that is notoriously inflexible.

Craft brewing shows no signs of slowing down or losing popularity. If Michigan’s regulators and legislators get on board, it will only improve the industry’s potential for growth. We can all raise glass to that.

'Learning In Progress' on Legislative Roads Proposals

How to make Senate’s tax cut trigger the real deal

Both the Michigan House and Senate have passed their own road funding plans after the colossal failure of Proposal 1. Both plans show that lawmakers have learned from that debacle.

The House proposal contains only a small tax hike on diesel, plus modest new assessments on electric, hybrid or “alternative” fuel vehicles (whose owners pay little or no gas tax). The rest of its new revenue for roads comes from earmarking a portion of future income tax revenue to road funding.

The Senate likewise earmarks some income tax revenue for roads, but also hikes the gas tax from 19 cents per gallon to 34 cents and the diesel tax from 15 cents per gallon to 34 cents. The Senate seeks to sweeten this pill with a plan to lower the state income tax rate — sometime, maybe.

There are ways to strengthen the provision, however, and an income tax rate cut could more than mitigate the proposed fuel tax hike.

The 4.25 percent income tax is the second-largest levy imposed in Michigan — only property taxes take more — so reductions in its rate can have a large economic impact.

In its current version, the Senate’s plan would reduce the state income tax rate whenever the state’s General Fund has been allowed to increase faster than inflation. “Allowed,” because the Legislature has ample opportunities to game the GF in ways that would allow its members to avoid promised tax cuts with minimal accountability.

They might not even have to play games to make the provision a dead letter. Even as total state tax revenue inceased strongly from 2009 to 2014, official budget reports show that revenue allocated to the GF rose by less than the rate of inflation. In other words, had the Senate’s tax cut “trigger” been in effect during the past five years of steady tax revenue growth, it would have triggered no income tax cut.

One reason for sluggish GF growth was the rampant expansion of corporate welfare by previous administrations. Specifically, the practice of doling out “refundable” business tax credits to favored businesses, in agreements extending up to 20 years into the future. This created a $9 billion unfunded taxpayer liability that is being paid down by taking money from the GF.

Future lawmakers could also dodge the tax (and spending) cuts the Senate’s trigger might cause with various gimmicks; the simplest would be to just transfer some money from the GF to the state’s “rainy day fund.”

And in any event, other less objectionable earmarks divert most state tax revenue away from the GF (to school funding, for example). The state collected a total of $27.4 billion in taxes last year, of which only $8.8 billion was directed to the GF.

These problems could be easily avoided by simply placing future income tax rate cuts in statute. This would put taxpayer savings on autopilot, with no opportunity for politicians to game away promised rate cuts in ways that dodge public accountability.

That’s still no guarantee that rate cuts would actually happen. A 2007 income tax rate increase also baked future cuts into statute, but these evaporated in the 2011 corporate and individual income tax overhaul that abolished the Michigan Business Tax.

But at least the politicians would have to cast a fairly unambiguous roll call vote to cancel a tax hike.

Alternatively, a Republican-run House, Senate and governor’s office could summon the political will to make a large gas tax hike revenue-neutral by offsetting it with equivalent income tax rate cuts, or continue to look within the budget to find more money for roads.

Or the Senate could just go along with the House-passed road plan, which reprioritizes current revenue with no big fuel tax hikes.

Reason Quotes LaFaive on Sin Taxes

Examining the unintended effects of cigarette taxes

Michael D. LaFaive, director of the Morey Fiscal Policy Initiative at the Mackinac Center, has spent years studying the unintended effects of cigarette taxes. This week, he was quoted in an article for Reason looking at the overall impact of sin taxes.

It's "Prohibition by price," Michael LaFaive tells me. He's an economist with Michigan's Mackinac Center for Public Policy, which, among other things, studies the effects of skyrocketing cigarette taxes. And just as overt efforts to snatch booze from Americans spawned a dynamic and dangerous black market in smuggled liquor, his organization's research reveals that implicitly prohibitionist schemes to make tobacco unaffordable have already done the same.

In New York, where authorities boasted just weeks ago of busting a $3 million smuggling ring, 58 percent of all cigarettes sold in the state are smuggled. With state taxes at $4.35 per pack, and New York City imposing another $1.50 charge, it's a no-brainer to load trucks at Virginia's $0.30 per pack rate and illegally drive them up Interstate 95 to customers suffering the country's most onerous tax.

The full article is available on Reason's website.

Reitz Quoted on Transparency in Michigan Press

Detroit officials using private emails for business

A story in the July 20 edition of the Detroit Free Press exposed various city officials using personal email addresses to conduct city business. Although city policy prohibits the use of private accounts for confidential business, Detroit Mayor Mike Duggan said the cases in question did not involve confidential information.

Mackinac Center Executive Vice President Mike Reitz commented for the story:

Open records experts said the practice is perilous, potentially making it more difficult for the city to access public records stored on employees’ personal e-mail accounts and easier for public officials to delete e-mails that are subject to the state’s Freedom of Information Act.

“I think it’s very troubling for public employees to use private e-mail accounts to conduct public business,” said Michael Reitz, executive vice president of the Mackinac Center for Public Policy and board member of the Michigan Coalition for Open Government. “It sends a signal to the public that business is being conducted outside the scope of the public records law.”

The full article is available at the Detroit Free Press website. Reitz also discussed the story with WXYZ, a segment which can be viewed here.

July 17 MichiganVotes Weekly Roll Call Report

Recent constitutional amendment proposals of general interest

The Senate did not meet this week, while the House convened but took no votes. This week’s Roll Call Report again examines some more recent constitutional amendment proposals of general interest.


House Joint Resolution E: Establish part time legislature

Introduced by Rep. Michael Webber (R), to place before voters in the next general election a constitutional amendment that would limit annual legislative sessions to 90 days. Legislative proposals to amend the constitution require a two-thirds vote in the House and Senate. Referred to committee, no further action at this time.


House Joint Resolution I: Require property tax assessments to more quickly reflect market declines

Introduced by Rep. Lisa Lyons (R), to establish that if a property's assessed value has decreased, then the property taxes imposed on it must go down in proportion in the following year. Under current practice, assessors use a “moving average” of a property’s value over several years, so if values go down an owner could still be assessed more the next year. Referred to committee, no further action at this time.


House Joint Resolution M: Ban “lame duck” legislative sessions

Introduced by Rep. Joel Johnson (R), to establish the first Monday in November as the final day of the legislative session in even years (general election years). In other words, to prohibit “lame duck” legislative sessions held after the election. Referred to committee, no further action at this time.


House Joint Resolution T: Ban income tax on individuals or businesses

Introduced by Rep. Cindy Gamrat (R), to place in the constitution a prohibition on imposing a state income tax on individuals or businesses. Referred to committee, no further action at this time.


House Joint Resolution U: Revise effective date of new laws

Introduced by Rep. Edward McBroom (R), to establish that, unless it specifies otherwise, a bill passed by the legislature goes into effect 90 days after the governor has approved it. Under current provisions, the “default” effective date of new bills is 90 days after the legislature adjourns for the year, which can be changed only with a supermajority two-thirds vote. This requirement sometimes is the cause of legislative gamesmanship and “log rolling.” Referred to committee, no further action at this time.


House Joint Resolution Z: Ban Obamacare exchange

Introduced by Rep. Todd Courser (R), to prohibit creating a state based version of the health insurance exchanges that are part of the federal health care law. Referred to committee, no further action at this time.


House Joint Resolution G: Repeal constitutional ban on private school tuition tax credits

Introduced by Rep. Gary Glenn (R), to repeal a provision in the state constitution that prohibits the state from offering tax credits based on tuition paid to a non-public school. Referred to committee, no further action at this time.


Senate Joint Resolution E: Ban giving charter school management contracts to for-profit companies

Introduced by Sen. Rebekah Warren (D), to prohibit operation of a public school from being contracted out to a for-profit education management company, which is a common way of operating charter schools. Referred to committee, no further action at this time.


Senate Joint Resolution C: Allow NRTC funds for logging and mining infrastructure

Introduced by Sen. Tom Casperson (R), to include road infrastructure for natural-resource based industries in the things for which Natural Resources Trust Fund money can be used. This money comes from oil, gas, and mineral royalties and leases on state-owned lands, and currently may be used for state land acquisitions, and conservation and recreation projects. Some legislators have expressed concern that, theoretically, nothing prohibits the current constitutional mandate from requiring the state to eventually buy all the land within its borders. Referred to committee, no further action at this time.


Senate Joint Resolution J: Increase maximum age of judges

Introduced by Sen. Steve Bieda (D), to place before voters in the next general election a Constitutional amendment to revise the current age limit on judges, from 70 to 75 years old. Referred to committee, no further action at this time.


Senate Joint Resolution H: Ban welfare for illegal aliens

Introduced by Sen. Joe Hune (R), to place before voters in the next general election a constitutional amendment to prohibit the state from giving any kind of “public assistance” to illegal aliens. Referred to committee, no further action at this time.


SOURCE: MichiganVotes.org, a free, non-partisan website created by the Mackinac Center for Public Policy, providing concise, non-partisan, plain-English descriptions of every bill and vote in the Michigan House and Senate. Please visit http://www.MichiganVotes.org.

A Victory for Political Free Speech

Wisconsin Supreme Court rules raids unconstitutional

In the pre-dawn hours of Oct. 3, 2013, heavily armed deputies raided the homes of independent political activists across the state of Wisconsin who agreed with the government union reforms enacted by Gov. Scott Walker. The raids were to seize records related to political activities and were orchestrated by a partisan district attorney under color of two poorly drafted and misguided state statutes.

Until now, one of these laws restricted political speech through campaign finance regulations. The other (still in force) gives prosecutors the power to undertake open-ended inquisitions targeting suspected criminal activity — or against political enemies.

The Wisconsin Supreme Court has just ruled 4-2 that the law restricting political speech is “unconstitutionally overbroad and vague.” According to the Milwaukee Journal Sentinel, the court ordered that “the special prosecutor and the district attorneys … must cease all activities related to the investigation, return all property seized … from any individual or organization, and permanently destroy all copies of information and other materials obtained through the investigation. All unnamed movants are relieved of any duty to cooperate further with the investigation.”

The context for these events is a broad-based attack against the heart of the First Amendment — its guarantee of political free speech — unlike anything seen in this country since perhaps the Alien and Sedition Acts of 1798. The assaults are occurring across a broad front, ranging from IRS targeting of nonprofit tea party groups, to a U.S. constitutional amendment supported by every Democrat in the U.S. Senate last year that would give politicians the power to restrict political speech, and the use of campaign finance disclosure mandates to bully and intimidate supporters of “politically incorrect” causes.

The Wisconsin speech raids are perhaps the ugliest example of this ongoing assault. In effect, the abusive actions of a partisan DA were a continuation of the union-organized tantrums on the streets surrounding the Wisconsin state Capitol in Madison in 2011 when Gov. Walker's reforms were enacted. But unlike those boisterous public demonstrations, this political actor had the power to dispatch men with guns on secret raids to silence those he disagreed with.

The so-called John Doe law authorizing the raids even prohibits targets of such abusive prosecutorial excess from speaking out against their victimization.

One target, Eric O’Keefe, president of the Wisconsin Club for Growth, who was not raided but had records subpoenaed, defied the gag order and filed a federal civil rights suit against the Milwaukee district attorney. The suit has since stalled, but in an earlier ruling federal judge Rudolph Randa wrote, “The larger danger is giving government an expanded role in uprooting all forms of perceived corruption which may result in corruption of the First Amendment itself.”

Illustrative of the nationwide scope of the current attacks on political free speech, last week The Wall Street Journal revealed that Kevin Kennedy, director of a “Government Accountability Board” authorized by Wisconsin’s speech restriction law, had a long-standing association with former IRS tax-exempt organizations director Lois Lerner, an individual central to the agency’s ongoing persecution of groups with ideologies contrary to that of the current administration.

~~~~~~~~~

More from the Wisconsin Supreme Court’s ruling:

“Our lengthy discussion of these three cases can be distilled into a few simple, but important, points. It is utterly clear that the special prosecutor has employed theories of law that do not exist in order to investigate citizens who were wholly innocent of any wrongdoing. In other words, the special prosecutor was the instigator of a ‘perfect storm’ of wrongs that was visited upon the innocent Unnamed Movants and those who dared to associate with them. It is fortunate, indeed, for every other citizen of this great State who is interested in the protection of fundamental liberties that the special prosecutor chose as his targets innocent citizens who had both the will and the means to fight the unlimited resources of an unjust prosecution. Further, these brave individuals played a crucial role in presenting this court with an opportunity to re-endorse its commitment to upholding the fundamental right of each and every citizen to engage in lawful political activity and to do so free from the fear of the tyrannical retribution of arbitrary or capricious governmental prosecution. Let one point be clear: our conclusion today ends this unconstitutional John Doe investigation.”

Article on Worker's Choice in Forbes

Vernuccio discusses recent developments in labor reform

Earlier this year, the Mackinac Center published the study Worker's Choice — a new concept that would allow workers to represent themselves if they wish to leave their union.

Director of Labor Policy F. Vincent Vernuccio recently published an article on the concept and how it relates to current Supreme Court and NLRB cases in Forbes:

In right-to-work states, unions cannot require those they represent to pay them. Unions claim this creates a “free-rider” problem, because they must represent these nonmember (nonpaying) workers. But these nonmembers could also be considered “forced-riders” as they must accept union representation whether they want it or not. …

Forced-riders and representation exist because unions have fought for legislation establishing exclusive rights. These laws forbid anyone else—including individual workers—from negotiating contracts, and in many cases, representing workers in grievances and disciplinary hearings.

To read the full article, visit Forbes' website.