The MC: The Mackinac Center Blog

December 2, 2016 MichiganVotes Weekly Roll Call Report

Give taxpayer cash to developers; permissive regs for Uber; ban local bag bans and more

Senate Bill 1153, Give cash subsidies to Dan Gilbert and other developers: Passed 30 to 7 in the Senate

To authorize a new way of giving up to $250 million worth of state subsidies each year to certain developers and business owners selected by state or local political appointees. This would use the device of “abating” employee income tax withholding requirements to give virtual cash subsidies to select business owners. Reportedly the bills are intended to deliver subsidies to Detroit developer Dan Gilbert and up to 14 others around the state.

Who Voted “Yes” and Who Voted “No”

Senate Bill 1061, Give cash subsidies to smaller developers and business owners too: Passed 29 to 8 in the Senate

To authorize a new way of giving state subsidies to certain developers and business owners selected by political appointees on local brownfield authority boards. This would use the device of “abating” a particular firm's income tax withholding to give its owner virtual cash subsidies - and reduce state revenue available for other purposes - similar to the Dan Gilbert subsidies described above.

Who Voted “Yes” and Who Voted “No”

Senate Bill 627, Authorize “public-private partnerships” with broad powers: Passed 30 to 6 in the Senate

To give state and local government agencies the power to enter into joint operating arrangements with a particular business for purposes of building a transportation project or health care (hospital) or laboratory facilities. These operations could be ones solicited by a private developer, and would benefit from the government partner's tax exemptions and its power to impose property tax levies, borrow, take private property using eminent domain, levy tolls and user fees and more. Among (many) other things this would authorize new toll roads or toll lanes. The government agency involved could choose the private sector actor without necessarily having to accept the lowest bid.

Who Voted “Yes” and Who Voted “No”

House Bill 4637, Regulate Uber, Lyft, etc.; preempt local bans: Passed 31 to 4 in the Senate

To establish a regulatory framework to enable “transportation network companies” like Uber and Lyft to operate, including a preemption on local government restrictions, regulations or bans. Taxis and limousines would henceforth be subject to the same state rules. The companies would need a state permit, pay state fees for three years and carry specified liability insurance. Passengers would be covered by insurance similar to provisions for taxis but with higher liability limits. The companies would be responsible for driver background check and vehicles inspections that meet specified standards. The cars would have to bear signs, with ride requestors given specified information and options. Street hailing and the use of cab stands by the network company vehicles would be prohibited.

Who Voted “Yes” and Who Voted “No”

Senate Bill 1085, Give certain companies subsidies for hiring non-resident: Passed 23 to 13 in the Senate

To expand the definition of “new job” that makes selected businesses eligible to collect certain state "21st Century Jobs Fund" subsidies, so a firm located in a border county could get a subsidy or tax break for hiring a person who does not live in Michigan.

Who Voted “Yes” and Who Voted “No”

House Bill 5851, Limit Tax Increment Finance Authorities; require transparency: Passed 60 to 48 in the House

To establish new revenue limits and reporting and transparency requirements for downtown development authorities. The bill is part of a package that applies these new standards to different types of "TIF" authorities that have the power to skim local property taxes to support their own projects and subsidies.

Who Voted “Yes” and Who Voted “No”

House Bill 5400, Expand scope of practice for nurses: Passed 102 to 5 in the House

To expand the scope of practice allowed for Advanced Practice Registered Nurses (including nurse-midwives, nurse practitioners, or clinical nurse specialists), so they can provide more medical services without being under the direct supervision of a physician, including house calls and "doctor's rounds" in a hospital.

Who Voted “Yes” and Who Voted “No”

Senate Bill 853, Preempt local plastic bag bans: Passed 62 to 46 in the House

To preempt local governments from imposing regulations, restrictions or taxes on plastic grocery bags or other "auxiliary containers," defined as a disposable or reusable bag, cup, bottle or other packaging. Washtenaw County has already imposed a bag tax and reportedly others are considering bans.

Who Voted “Yes” and Who Voted “No”

SOURCE:, 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

Mackinac Scholars Challenge Tourism Officials to Debate

Letter sent to key proponents of Pure Michigan campaign

Editor's note: When this story was first posted, David Lorenz of the MEDC had not responded. He has responded since publication and turned down the offer for a debate. Click HERE to see his entire response.

Author’s note: The following letter was sent to Travel Michigan vice president David Lorenz and Michigan Lodging and Tourism president Deanna Richeson on Nov. 1 via email. A physical copy was also mailed to the pair and author Michael LaFaive tried contacting each recipient by telephone. Neither have responded to any communications.

November 1, 2016

Mr. David Lorenz
Michigan Economic Development Corporation
300 North Washington Square
Lansing, MI 48913

Ms. Deanna Richeson
Michigan Lodging and Tourism Association
2175 Commons Parkway
Okemos, MI 48864

Dear Mr. Lorenz and Ms. Richeson:

I am writing to extend to you both an invitation to publicly debate Michael Hicks and myself in Lansing on the question of the efficacy of the state’s Pure Michigan tourism advertising program. The Mackinac Center will host the event at a luncheon or dinner and live-stream it on the internet. If this is agreeable I’m sure we can find a mutually convenient date and time.

As you know, the Mackinac Center has published articles critical of taxpayer-supported state advertising campaigns for the tourism industry. Our statistical study of these indirect subsidies provides evidence that the program’s economic impact is actually negative for the state.

Specifically, our work suggests that for every $1 million increase in spending on state tourism promotion there is a corresponding increase of only $20,000 in extra economic activity shared by state’s accommodation’s industry. This would mean the program represents a huge net loss for taxpayers, delivering less than negligible benefits even to those who should theoretically benefit most directly.

Our study uses publicly available data and transparent methods. Our methodology, assumptions and limitations are fully disclosed in a detailed appendix, including the rationale behind our statistical model and the tests we employed to determine its robustness. We built the model after a thorough review of the academic literature, and its output was peer reviewed by scholars who are not known to Hicks or me.

As a result, you or any other interested researchers will find our results easy to replicate. As you probably know, these things cannot be said about the claims that have been made by the Michigan Economic Development Corporation or its contractors about the Pure Michigan program.

Published reports indicate that you both disagree with our previously reported findings. Naturally we are curious regarding the basis for your dissent. Given the millions of dollars of public money at issue, we believe lawmakers, journalists and the public would also like to know this, and deserve to know it.

We are also curious as to why claims of extraordinary Pure Michigan returns on investment made by your consultant should be taken seriously, given this contractor’s lack of transparency.

We believe that valid empirical scholarship is the means by which our knowledge of the world is expanded. Policymakers and the public benefit when knowledgeable experts engage in a fair and robust exchange of views.


Michael LaFaive
Morey Fiscal Policy Initiative

How the New York Times Distorts the Performance of Detroit Charters

Best available research shows Detroit charter schools are successful

President-elect Donald Trump will nominate Michigan philanthropist and school choice advocate Betsy DeVos as his Secretary of Education. DeVos has worked on education policy for decades and her record shows that she believes in parental freedom over centralized control when it comes to deciding where kids go to school.

Unions, conventional school district leaders and leftist academics are not happy about the pick. Charters, vouchers, tax credits and homeschooling have all been increasing across the nation and when parents and kids get a choice, they are increasingly choosing something other than their government-assigned school district.

Since the DeVos family is in Michigan and generally support public charter schools, much of the critique has focused on these schools’ performance. These are the only publicly funded independent schools here, because, unlike most other states, the Michigan Constitution prevents using vouchers or tax credits to help parents afford tuition at private schools. Nevertheless, the best research available shows that charter schools in Michigan have been successful, especially in Detroit.

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But the New York Times and others are heavily distorting the results of Michigan’s charter schools (CapCon has a few examples). And many of these critiques rely on a front-page news article from the New York Times from this past summer (see here, here, here). The article was heavy on anecdotes and just factually inaccurate in a number of instances.

A full take-down can be read here, but I’d like to focus on one point to show the level of distortion the article resorts to. Jason Bedrick of the Cato Institute notes how Times reporter Kate Zernike words the performance of charter schools in the Motor City: “[H]alf the charters perform only as well, or worse than, Detroit’s traditional public schools.”

This information comes from a 2013 study from Stanford University’s Center for Research on Education Outcomes. The way the NYT article summarizes the findings isn’t technically incorrect, it is just cherry-picked in such a way as to totally distort what the study actually says.

Here is a chart from the 2013 CREDO study:

As the table shows, it’s true that half the charters in Detroit are doing “only as well, or worse than” district-run schools in the city. By lumping together the charters that are doing about the same and those that are doing worse, Zernike masks the inconvenient truth that only one charter in Detroit performed worse in reading and only seven performed worse in math.

As Bedrick notes:

Grouping the very few underperforming charters with the approximately half of schools that perform at roughly the same level as the district schools distorts the picture. It’s just as fair to say that more than nine out of ten Detroit charters performed as well or better than their district school counterparts. The most accurate description would note that about half of Detroit’s charters outperform their district school counterparts, about half perform roughly the same, and a very small number underperform.

No matter how the NYT and others try to spin the data, the best research shows that Michigan charter school students are outperforming their peers in district-run schools. Detroit charter students are doing even better. This is why, in a later report, CREDO researchers suggested Detroit’s charter schools “serve as models to other communities.”


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Betsy DeVos
Betsy DeVos

Last week’s announcement of Betsy DeVos as President-elect Trump’s pick to head the U.S. Department of Education cheered school choice supporters. That’s because DeVos, a long-time advocate of school choice, will have a bully pulpit to highlight successful choice programs around the nation.

In her own state of Michigan, an especially onerous constitutional provision prohibits voucher programs or tax credits that other states use to help children enroll in private schools. The DeVos family backed a 2000 statewide initiative to change the constitution to provide these options for some students trapped in failing public schools. But voters rejected the initiative.

Nationwide, however, the landscape has changed greatly in the years since. In 2000, only a handful of states offered voucher-like programs. This year, the number sits at 25 — half the states. Across the country, about 380,000 students receive a total of $1.83 billion in aid, distributed through vouchers, education savings accounts or tax-credit scholarships.

On the campaign trail, Donald Trump talked about shifting $20 billion of federal money to states that would expand school choice. That number would mean many more children could benefit from having more options at other schools. For now, the number is just a piece of campaign rhetoric. Any plan to redirect funds away from existing agencies and to students in schools of their own choosing would require congressional approval. The effort would also face hurdles that include rolls of red tape and complex, ingrained funding formulas.

In Michigan, nearly 10 percent of all public school revenue comes from federal government sources. The largest pots of federal education money are intended to help provide services to low-income students ($459 million in 2016-17) and those with special needs ($441 million in 2016-17). Most of those dollars are earmarked for school districts and charter schools, not families and students who need extra help.

There is a compelling case to ramp up educational opportunity now; many students cannot afford to wait. But a grand school choice program would clash with the justifiable desire to downsize the role of the federal government in education. It is true that states could use the dollars to create new ways to help students. Some would benefit from having the doors to private schools open with new money, while others would gain from their public schools having to improve to stay competitive.

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That scenario would be highly appealing, especially in a state like Michigan that has strict constitutional limits that tie the hands of lawmakers who want to help. But there are also wide-ranging consequences to consider. Private schools, tutoring companies and others that take federal money could become more dependent on the regulations and whims of the federal bureaucracy. Even if the first batch of money came without strings, what guarantee is there that future administrations would continue to offer money with a loose hand?

There will be other issues for DeVos to address, such as considerations of flexibility for states in dealing with the recently passed federal education law and the department’s inclination to intervene in contentious social issues such as the bathroom wars. But a more important result of her appointment may be that it will open the door to important conversations about the best way to serve children through educational freedom.


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The Mackinac Center at the 2016 Mackinac Policy Conference

Policy Experts Available to Discuss Key Lame Duck Bills

Mackinac Center analysts offer insights on ridesharing, pension, energy and economic development bills

Tuesday, Nov. 29, 2016

Chantal Lovell
Media Relations Manager

MIDLAND, MICHIGAN — Analysts at the Mackinac Center for Public Policy are available to discuss several bills likely to move during the Michigan Legislature’s lame duck session.

Expertise is offered on the following issues and bills:

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“Michigan should join the rest of the country and officially legalize ride-sharing so all residents can benefit from this new innovation. The ride-sharing regulations the Legislature is considering are very good, as they provide uniform safety requirements of the companies and create a level playing field for taxis, limos, Uber and Lyft to compete for our business.” – Michael Van Beek, director of research

Teacher Pensions/SBs 102, 1177, 1178
“The underfunding in the school retirement system hurts employees, schools and taxpayers alike. Offering new employees benefits that will not be underfunded will eventually stop the state from deferring retirement costs to the future.” – James Hohman, assistant director of fiscal policy

Energy/SB 437
“President-elect Trump has said he will kill the Clean Power Plan and step away from the Paris agreement, which effectively removes a significant impetus for the continued closures of Michigan’s coal-fueled generation assets. Although DTE and Consumers Energy have publicly stated they are pushing forward with the coal closures regardless of what the Trump administration does, they can’t reasonably claim an absolute need to close down every coal plant on the schedule they have laid out. SB 437 would effectively eliminate the limited electricity choice that exists in Michigan and ultimately hurt ratepayers.” – Jason Hayes, director of environmental policy

Economic Development/SBs 1061-1065
“Politically connected private developers are asking taxpayers to subsidize their deep-pockets under the guise of economic development. These publicly funded projects rarely live up to their promise and do not justify their costs.” – James Hohman, assistant director of fiscal policy

To set up an interview with any of the experts, please contact:

Chantal Lovell
Media Relations Manager
989-251-8388 (call or text)

# # # # #


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Pistons Move to Downtown Comes With Big Taxpayer Price Tag

Mackinac Center experts comment on the deal in state media

Detroit’s four professional sports teams will soon be housed within walking distance of one another, but that close proximity will come at a hefty cost to taxpayers.

The Detroit Pistons announced this week they will move to Little Caesars Arena next season, joining the Detroit Red Wings who already play there. The Tigers and Lions play at Comerica Park and Ford Field, respectively.

Taxpayers will fork over $34.5 million to subsidize the move through arena improvements. According to Mlive, that’s on top of the $250 million taxpayers paid toward construction of the arena.

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Mackinac Center for Public Policy’s Michael LaFaive, director of the Morey Fiscal Policy Initiative, spoke with a number of media outlets across the state about the deal. He told the Associated Press that taxpayers shouldn’t be forced to fund private business ventures or take on the risk associated with such deals. In an interview with the Detroit Free Press, LaFaive said subsidizing the stadium means tax dollars cannot be spent in other places where they may be more necessary.

“If it's reasonable, then they should have no trouble raising the money through private means,” he said. "What is the opportunity cost to building these stadiums? Is it a library not funded? Is it a school underfunded?”

The Detroit Metro Times noted that believing corporate welfare is wrong and a bad deal for taxpayers is something on which people from a wide range of ideologies can agree. The outlet quoted Mackinac Center Vice President for Marketing and Communications John Mozena and pointed to a study that finds sports stadiums fail to cause new businesses in the area to open.

“Instead of creating new demand and new customers for bars and restaurants, subsidized stadiums unfairly compete for a consumer’s entertainment dollar with those businesses,” Mozena said.

The Metro Times went on to note that when entities that don’t typically find themselves on the same side of an issue agree, there’s reason to listen.

“Let's just say that when MT and MCPP agree that something is wrong, it's hard to dismiss it as a fringe complaint.”

Read the full AP article here.

Read the full article in Mlive here.

Read the full article in the Detroit Free Press here.

Read the full article in the Detroit Metro Times here.


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Unions Fight their Members’ Interests on Pensions

Containing and curing pension underfunding benefits retirees, workers and taxpayers

Unions are supposed to look out for the interests of their members. But the well-being of their workers is forgotten when it comes to pensions.

In the Lansing State Journal, American Federation of State, County and Municipal Employees Council 25 legislative director Nick Ciaramitaro argues that the state needs to keep its hands off worker retirement systems.

He ignores the billions in debt these pension systems have incurred. The failure to adequately fund pensions has drained taxpayer resources, forced employee concessions and left pensioners to question their retirement security.

Few of Michigan’s government pension systems have set aside enough to pay for the pension promises they have made. The largest system — the one for school employees — has promised $68 billion in pension benefits, but saved only $41 billion.

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Thus the need to make extra payments into these pension systems. Most of the money now being paid into this system now goes to catch up on past underfunding, not to build a nest egg to cover the new pensions current employees are earning.

Ciaramitaro isn’t the only union official that refuses to acknowledge the burden of these unfunded liabilities. In response to a bill to offer new employees defined-contribution benefits, MEA spokesman David Crim told Mlive, “This provides a solution to a problem that does not exist.”

But the $26.7 billion in unfunded liabilities are a problem. Payments by school districts to catch-up on unfunded pension liabilities have swollen from 4 percent of payroll in 2006 to 15 percent today. This is forcing school layoffs and salary concessions across the state. It means today’s school funding increases are merely covering deferred expenses from yesterday’s classrooms, rather than providing value for the children sitting in today’s classes.

Mr. Ciaramitaro claims taxpayers will be forced to pay perilous “transition costs” if new employees are no longer enrolled in school pensions, meaning the system’s debt needs to be paid off more quickly. While putting more money in the system would pay down unfunded liabilities, no law requires this. Other states have closed their government pension systems without triggering these phantom costs.

Not enrolling new hires into the underfunded pension systems – instead giving them employer contributions to retirement savings accounts – would contain and eventually cure the underfunding problem. That would benefit retirees, workers and taxpayers alike.


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How to Revamp Michigan’s School Rating System

Include comparisons, tie growth to standards and issue grades

The Michigan Department of Education will soon launch a listening tour for school employees and citizens to chime in about how to implement the new federal education law. The recently adopted Every Student Succeeds Act gives states some greater flexibility in setting several policies, including how they measure and report school performance.

Michigan should use the law as an occasion to revamp its school rating system and change how it’s reported to parents. It needs a fairer measuring tool that doesn’t punish schools for enrolling a lot of kids with learning struggles. The state can both acknowledge the challenges facing students and schools and uphold high standards.

For years, Mackinac Center analysts have criticized the state’s Top-to-Bottom Rankings, which too closely tie school quality measures to rates of student poverty. The Center’s Context and Performance Report Cards – including a forthcoming new edition of the high school version – grade schools on how well they do in comparison with their predicted performance based on the average socio-economic status of their students.

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ESSA will require Michigan to rank most schools based on a combination of raw achievement scores and student academic growth. (High schools can substitute or complement a measure of growth with graduation rates.) As the state updates its system, an extra component that compares schools of like demographics could add some needed balance.

The quality of reading instruction at a school like Kent County’s North Godwin Elementary looks mediocre or weak when compared to the state proficiency rate. But matched up against other Michigan schools serving students with similar demographics, North Godwin is at the top of the chart.

By the same token, a full portrait of school performance cannot lean too heavily on comparisons, especially not in the upper grades. Students entering society and the job market will not be strictly compared to others from the same strata of family background. A ranking system needs to be designed so that it both recognizes the challenges students bring in the door and pushes schools and students to close achievement gaps over time. It also needs to raise the bar for everyone.

A key way to balance these concerns is to adopt a better metric of academic growth. The student growth percentile being promoted by the Michigan Department of Education creates real limitations. This metric is rooted entirely in comparing a student’s yearly change to that of his academic peers, not to a fixed standard. Nearly all kids of a certain proficiency level could fall short of the trajectory they need to be proficient but still be deemed successful for growing at a faster rate than half of their peer group.

A school should measure how much students in every demographic group learn. But it should also get credit for how well the lowest and highest performers improve. Students who are the most challenged or most academically accomplished often are the most easily neglected.

Florida has made good use of a system that credits schools for moving individual students up the proficiency scale. Michigan education officials have invested time and resources into grading on the curve, so there’s a temptation to keep what they have built. But the Florida-style approach is better, and it offers the added bonus of being less technically challenging to implement and oversee.

Under ESSA, Michigan also is encouraged to move beyond standardized assessments and graduation rates and give some other measurement a small but real role in measuring school quality. Many options are on the table. Officials should look for ways of measuring how achievement gaps are closed in the early grades. They also should look for ways to measure how well schools prepare students for a post-high school career, such as passing Advanced Placement tests, dual enrollment college courses or industry certifications.

All students need meaningful and easily understandable information about how well schools perform. This is especially true for parents whose children are stuck in failing schools. They need to know what better alternatives exist, such as a charter school or a Schools of Choice option that would benefit their child. Michigan can help these parents by giving each school a single, easy-to-understand, overall grade and then report these results regularly.

It won’t be enough to give grades to schools. The state also ought to clearly report how each school earned its grade. Did it get a C because its well-off students are relatively high-achieving but coasting along? Or is the middling grade the result of a school overcoming challenges and making some strides, but not quite where it needs to be yet? The state should keep and enhance its education dashboard to facilitate the judgments of parents and school leaders.

These are broad guidelines for a new school ranking system, and there are still a lot of details that need to be considered. But Michigan needs to shine a clearer spotlight on its schools if it wants to have an earnest attempt at improving them.


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Study: New Sports Facilities Do Not Increase New Business Openings

Research discredits idea for ‘catalyst’ or ‘transformational’ developments

A rendering of Little Caesar's arena.

The Detroit Pistons today are scheduled to announce that they will be returning to Detroit from their home in Auburn Hills. They will share space in the new Red Wings stadium but are looking to build a practice facility. The local Downtown Development Authority is involved in the transaction somehow, but details about its specific contribution are unclear. Like any DDA, the Detroit authority can provide taxpayer incentives and other assistance to private business operations.

The new Red Wings stadium — which is still under construction — was dubbed a “catalyst” development by Lansing lawmakers in 2012 when they granted financial favors to the hockey team’s owner. The idea behind a “catalyst” development is that it is a big enough and powerful enough project to inspire more development.

But a study published in the Journal of Sports Economics, titled “Do New Sports Facilities Attract New Businesses?,” finds that new sports facilities are not business catalysts. This study is an important new contribution to the research on how professional sports affect the economies of major cities. It suggests that Michigan laws (passed or proposed) to promote “catalyst” or “transformational” projects that involve sports teams have no impact on the creation of new businesses. They also have little, if any, impact on employment.

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The study looks at 13 new sports stadiums that have opened in a dozen metropolitan statistical areas from 2002 through 2006, including Detroit’s Ford Field. It tracks businesses and workers at the census tract level, a narrower and more focused look than previous studies. The authors hoped to measure an impact from the opening of a new professional sports facility to “the number and composition of business establishments near new sports facilities.”

Instead, they found no impact on new businesses and some (though weak) evidence of higher employment at new businesses “compared to those new businesses located farther from the facility.”

This study is yet another in a long line of academic research that demonstrates the ineffectiveness of professional sports stadiums (or teams) — subsidized by taxpayers or not — in bringing about sustained economic development. The mountain of evidence that stadiums and teams don’t facilitate growth is clear, but lawmakers race to support them anyway.

In light of this scholarship, the Michigan Legislature should cease to subsidize, directly or indirectly, the efforts of professional sports teams and their owners. The Legislature should act in light of this new study and kill or modify a proposal that has already passed through a state Senate committee and could help private developers finance construction projects — such as a new Major League Soccer stadium in Detroit.

Most recently, a Michigan Senate committee approved legislation (SB 1061 and 1062) backed by businessman Dan Gilbert and designed to help public dollars finance private projects. Gilbert is the founder of Quicken Loans, among other companies, and has been acquiring properties in Detroit.

He is interested in bringing a Major League Soccer team and new soccer stadium to Detroit. Those are part of a larger project, which he would pursue along with Detroit Pistons owner Tom Gore. The centerpiece of the $1 billion project would be a new soccer stadium, but it would be accompanied by offices, restaurants and hotel accommodations.

The Senate legislation doesn’t mention sports stadiums or Dan Gilbert by name, but the proposed stadium project would appear to qualify for public support. Indeed, the bill contains some tailor-made attributes: It must be for a mixed-use project in a city with “a population of at least 600,000.” The project must also be worth at least $500 million. Whether the proposed legislation actually contributes to another Detroit stadium or some other project, it amounts to crony capitalism on steroids.

The facts are that most empirical and anecdotal evidence, along with economic theory, suggests that these laws and related programs do little if anything to facilitate new economic development over time. It’s time for lawmakers to stop granting favors to sports stadium owners.


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After Election Season, Economic Liberty Please

Lesson from a state-by-state study: Liberty promotes prosperity

The economic well-being of the people in a state is encouraged or hindered by the laws and policies that their legislature and governor enact. Each election brings a new set of officials who have a chance to reset the ways that government affects the economy. Given that, it’s prudent to remind the officials who will take office in January what policies have been shown by history to promote economic liberty and in turn, prosperity.

One valuable measure of economic liberty is produced by the Canada-based Fraser Institute and titled “Economic Freedom of North America.” This report ranks American and Mexican states as well as Canadian provinces in terms of economic freedom. Fraser’s newest report is due out next month so this is a good time to review where Michigan was and is in absolute terms, where we are relative to competing states and where we should go from here.

The 2015 report ranks Michigan 27th out of the 50 states. That’s a middling rank, though it has at least improved since 2010 when we were ranked 40th. Midwest sister states Illinois, Wisconsin and Ohio all ranked below Michigan at 33rd, 38th and 40th, respectively. Indiana bested all Midwestern states by a significant margin, ranking 18th overall.

The index is built around information in three major categories: spending by governments, the type and level of taxes, and laws and public policies about labor. The categories have a total of 10 variables attached to them, such as the amount government spends compared to the personal income of its citizens, the highest income tax rate and minimum wage laws. Each variable is given a score from 0 to 10, with 10 representing the highest amount of liberty and zero the least. The score for each category is then the average score of each of its variables.

According to objective statistics, economic liberty and human well-being tend to go hand-in-hand. So the index the Fraser report created can show Michigan residents how well they are doing compared to people who live elsewhere.

Experience suggests that if Michigan appears high in the rankings, its people will grow wealthy and have many opportunities. Take a look at the states and provinces that scored in the bottom 25 percent for liberty. In the 2013 report, their per capita personal income was 7.7 percent below the average of all provinces and states. On the other hand, income in the places that ranked in the top 25 percent for liberty was 6.7 percent above the average. It’s unlikely that the difference in income for those two groups was caused by mere coincidence.

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The index also tells policymakers where their state or province is weak, so it should be required reading for everyone who has the power to change government policy.

According to the 2015 Economic Freedom Index of North America (which uses data through 2013), Michigan scored a 6.6 out of 10 in government spending, a 6.9 for its tax policies and a 6.8 in labor market freedom.

Michigan’s ranking in the three categories and the 10 different variables within them suggests that the Great Lake State is not a leader or laggard in any key policy area. It ranks high at 8.0 for its low “top income tax rate” but Ohio and Indiana scored likewise. Conversely, the state ranks low in the “insurance & retirement payments as a percent of personal income,” which measures the taxpayers’ obligations to state and local government workers. Michigan scored a 5.0, but Ohio, Illinois and Wisconsin all ranked lower, meaning Michigan is not as hampered in this area as much as some of its neighbors.

One area where the Great Lake State could make relatively easy and marked improvement in is the variable of “income tax and payroll revenue as a percent of personal income.” Currently Michigan has a score of just 6.0. This is the best score among sister states but it should be much better.

In 2007 Gov. Granholm and the Michigan Legislature approved a “temporary” personal income tax hike of 11.5 percent. It was supposed to be rolled back by 0.1 percent a year, starting in 2011 and ending in 2015 at 3.9 percent. But Snyder and the Legislature scrapped this mandate after letting a single cut of one-tenth of a percentage point take place. Michigan workers are still owed a personal income tax cut.

Rolling the state income tax rate back to 3.9 percent, if not taking it even lower, would go a long way to spurring economic growth, too. Ultimately, Michigan’s personal income tax rate ought to be rolled back to zero.

The Economic Freedom Index of North America makes for a useful policy guide. It is not only chock-a-block with useful, very transparent data, but its rankings correlate highly with widely popular measurements, such as growth in personal income.

Lansing politicians would be wise to review its findings and act accordingly.


Related Articles:

Economic Freedom of the World Index: America’s Worrisome Decline

LaFaive Interview on Economic Freedom

Economic Freedom Matters

Freedom for Nations, States and Cities

Economic Freedom in Michigan and Beyond