The MC: The Mackinac Center Blog

Michigan Radio Features Fight Against Forfeiture

Bipartisan groups behind push for reform

The Mackinac Center has joined with groups from across the political spectrum, including the ACLU of Michigan and FreedomWorks, to push back against Michigan's civil asset forfeiture laws.

Civil asset forfeiture is a practice that allows law enforcement to take possession of private property without charging the owner with a crime. Some states, as well as the federal government, have taken steps to curb this injustice in recent years, but Michigan's laws were recently rated a 'D' by FreedomWorks in a national survey of forfeiture laws.

Michigan Radio reports:

… Michigan law enforcement agencies have collected more than $250 million in forfeiture revenue since 2000, with more than $24 million in cash and assets seized in 2013.

“What we don’t know is whether those seizures and forfeitures were ever connected with a criminal conviction,” [Harris] says.

The full article is available here.

Progressive State Income Tax Would Damage Michigan’s Economy

“Progressives” should be careful what they wish for

State Rep. Jim Townsend wants to amend Michigan’s constitution to allow a graduated state income tax, and raise the maximum rate to 10 percent. This would hurt the state as a whole, including those he wants to help.

The prosperity of this and every other state is determined by its rate of economic growth. And for growth, what matters is not the average tax rate but the marginal tax rate. That is, the amount of extra taxes an individual must pay on his or her next dollar of income. The higher the marginal rate the less incentive a person has to work overtime, study to get a better job, make an investment or take the risk of starting a business.

Townsend’s bill would increase the top state income tax rate from 4.25 percent to 10 percent, but this cannot be considered in isolation from the income taxes imposed by other layers of government. When federal income taxes are added, and in 22 Michigan cities local ones too, the highest combined rate on a Michigan taxpayer would jump to 52 percent under Townsend’s proposal, up from the current top rate of 46.25 percent.

There are some economic choices that make sense for an individual whose combined federal and state income tax rate is 14.25 percent — the lowest rate at which a dollar of income is now taxed in this state — but don’t make sense at higher rates. And when government takes more than half of the next dollar a person earns — as it would in some places under Townsend’s proposal — many individual decisions that would benefit this state’s economy would no longer make sense for the individuals making them.

Moreover, the damage to Michigan’s economy could begin very quickly given the amount of job- and business-establishment churn in the economy. More than 200,000 businesses opened or expanded in Michigan in 2013, adding roughly 800,000 jobs. On the other side, owners of around 190,000 businesses shed jobs or closed their doors altogether, costing roughly 750,000 jobs.

These decisions — whether to add or layoff one more worker, expand a firm or shut it down — are all made on the margins. Many factors go into such decisions, but marginal tax rates can have a powerful effect on tipping the scales for or against economic expansion. High marginal tax rates discourage activities that add or save jobs.

That makes it a fantasy to think such tax hikes would have no effect on business owners’ decisions, with potentially much larger consequences for those who work or would like to work for those firms.

Townsend’s proposal does lower marginal rates for some people. Rates would fall by 0.25 percent to 1.25 percent for individuals who earn $40,000 or less ($80,000 for joint returns).

But owners of the roughly 400,000 businesses who decide to expand, contract, open or close a Michigan business in any given year are more likely to be among those Townsend wants to pay more. Specifically, those with incomes higher than the amounts cited above would turn over an additional 0.75 percent to 5.75 percent of their income to the state. His proposed top rate of 10 percent is more than double the current flat rate of 4.25 percent

Supporters consider the proposed rate structure to represent a more fair tax system. But their analysis disregards the compounding effect of adding these rate hikes to the highly progressive federal income tax. The average federal tax burden for the bottom fifth of earners is just 1.9 percent, while it is 28.1 percent for the top fifth.

In addition, Michigan’s current flat income tax is more progressive than it appears on paper. Along with standard exemptions at all income levels, the state offers a “homestead property tax credit” and a bump to the federal Earned Income Tax Credit, which means many in the bottom tier of tax filers don’t just get tax refunds — they get a subsidy from other Michigan taxpayers.

Moving a bit further up the income ladder, the bottom third of people who file Michigan tax tax returns have no net state income tax liability whatsoever. And at the top end, 15 percent of the all state income tax collected by this state comes from just 0.7 percent of earners. Michigan’s “flat” income tax is already very progressive indeed.

So a graduated income tax would fix a “problem” that is already fixed, in a way that will harm the future of this state and all its residents — including those with low incomes.

National Group Gives Michigan a ‘D’ for Forfeiture Laws

Bills that would raise that grade languish in legislature

The national grassroots group FreedomWorks, which has 6.9 million members and supports limited government, gives Michigan a “D” in a new report about civil asset forfeiture.

The report card, “Civil Asset Forfeiture: Grading the States,” bases their ratings on the standard of proof the government must meet to forfeit property, who has the burden of proof (the state or the individual), and what percentage of forfeiture funds go to law enforcement.

In explaining the grade for Michigan, the report says, “The standard of proof is too low; the government may forfeit property by showing a preponderance of the evidence. The government must prove the property owner was not an innocent owner, if the owner claims this defense. Law enforcement receives 100 percent of forfeiture funds. A package of eight separate reform bills has passed the Michigan House with strong bipartisan support.”

The bills raising the standard of proof (although not as high as what is needed for a criminal conviction) and establishing strong transparency laws passed overwhelmingly in the state House. They are now sitting in the state Senate where they have not been taken up.

Economic Protectionism and Consumer Safety

Examining legal challenges to occupational licensure

A Tennessee law stated that only a licensed funeral director could sell caskets. The courts didn't agree.

An individual’s right to pursue an honest occupation without arbitrary governmental interference has been promoted and protected throughout Anglo-American history. But today that right is being reinterpreted and compromised, largely due to the overuse of protectionist occupational licensing schemes. Occupational licensing is often used as a tool to stifle competition and to limit disfavored groups. Unfortunately, it also has a long history of being abused to perpetuate racial inequality, including attempts to exclude the Chinese from construction jobs on California railroads and African-Americans from skilled trades such as plumbing. Even in the absence of racism, however, a legal construct known as the “rational basis” test makes it very difficult for entrepreneurs to successfully challenge the constitutionality of licensing laws in court.

The first case to deal specifically with occupational licensing was decided at a time when the courts were still carefully restricting new regulatory policies with an eye toward preserving the constitutional right to freely pursue an occupation. Dent v. West Virginia involved the nation’s first physician licensing laws, and the Supreme Court was concerned with protecting the public “against the consequences of ignorance and incapacity, as well as of deception and fraud.” Those restrictions with “no relation to such calling or profession” or licenses that were “unattainable by … reasonable study and application” would violate the Constitution. Since then, however, the argument that licensing laws need not relate to public welfare, but rather may exist for the sole purpose of benefiting one group over another, has gained traction.

In Craigmiles v. Giles, Pastor Craigmiles became frustrated at the exploitation of his congregation by funeral homes, which benefited from a law prohibiting the sale of caskets by anyone but a licensed funeral director. (The license required intensive training or apprenticeship, the payment of large fees, and passing a state board exam.) He decided to open his own casket business, and, when the state proceeded to enforce the casket sale restriction against him, filed a lawsuit alleging a violation of his rights under the privileges and immunities, due process, and equal protection clauses of the Fourteenth Amendment. Finding no “rational basis” or relationship to the public health (Tennessee did not even require people to be buried in caskets), the 6th U.S. Circuit Court of Appeals decided that the licensure requirement was “designed only for the economic protection of funeral home operators” and struck down the law.

But six days later, a federal district court in Oklahoma reached the opposite conclusion in a nearly identical case, Powers v. Harris, a decision that was upheld by the 10th U.S. Circuit Court of Appeals. Even if the Oklahoma scheme cost citizens their economic freedom, the circuit court opined, “the decision of the legislature must be upheld if ‘any state of facts either known or which could reasonably be assumed affords support for it.’” This deference to the rational basis test meant that the appeals court was not permitted to question the regulation or suggest alternatives. The court even went so far as to declare that “intrastate public protectionism constitutes a legitimate state interest.” Public welfare had been removed from the constitutionality calculus entirely.

The 9th Circuit referenced the Craigmiles/Powers divide when it decided a wildlife-control licensing case called Merrifield v. Lockyer. Faced with a truly bizarre law clearly designed to favor certain market participants over others similarly situated, the court ruled that “we agree with the Sixth Circuit in Craigmiles and reject the Tenth Circuit’s reasoning in Powers v. Harris. … Economic protectionism for its own sake, regardless of its relation to the common good, cannot be said to be in furtherance of a legitimate government interest.” The 5th Circuit unanimously agreed in 2011 when it decided its own casket case, holding that “the great deference due state economic regulation does not demand judicial blindness to the history of a challenged rule or the context of its adoption, nor does it require courts to accept nonsensical explanations for regulation.” This split among circuit courts over the issue of protectionism as a legitimate purpose for occupational licensing sets the stage for the Supreme Court to decide the question in a future case.

The question of the constitutionality of occupational licensing is an old one. While new regulations on entrepreneurs and skilled professionals are almost always billed as measures to protect the health and safety of the public, they are invariably promoted by one lobby or another with a financial gain at stake. Even assuming the best of legislators, special interests continue to muddy the waters in this area. It remains for litigators to defend those consumers and businesspeople in instances where the “protection” does more harm than good.

Albion Superintendent Jerri-Lynn Williams-Harper is asking nearby school districts to stop providing transportation to Albion students who have chosen to enroll in a different district through "Schools of Choice." Most districts throughout the state participate in SOC and have opened their doors widely and sought to serve disadvantaged students from other districts.

Williams-Harper, whose district has seen hundreds of students leave using SOC, wrote a letter to nearby districts asking them to "cease and desist immediately" from busing in Albion students to the schools of their choice.

By asking school districts to withhold busing, the Albion superintendent is trying to trap students in her district — specifically those who already want to leave. If Williams-Harper wants to boost enrollment in Albion, she would do better to give students reasons to stay, rather than trying to get other districts to stop serving them. That might take more time than simply writing a letter, but in the long run it will be more effective.

If any superintendents bow to her request, they will be complicit in forcing the neediest families — those who cannot provide transportation themselves — back to schools they’ve judged not to work best for them. Reneging on transportation would show that nearby school district leaders value preserving a floundering school district over helping nearby families.

Which raises the question: Does our public school system exist to serve families and children — or school officials and employees? Fortunately for Albion residents, it sounds as if nearby school districts will choose to serve families by continuing to offer transportation services.

Springport Superintendent Randy Cook, whose district enrolls 150 Albion students, told MLive, "We've tried to be as respectful as we can be, but we also have to be responsive to the parents who want their children to come to Springport for the quality education we provide them."

Perversely, Williams-Harper is trying to stop activity that school choice critics should be applauding. Many critics of choice worry that the students who leave their neighborhood districts are more affluent — because districts are not required to provide transportation to SOC students. (This is not a problem with regards to charter schools, another popular public school option in Michigan: Charters are more likely to enroll low-income students than conventional districts.)

Indeed, John Austin, president of the State Board of Education, voiced this very concern at a forum in Albion in 2013, "Who gets to exercise that choice, if you don’t provide transportation? Is this choice equitable for everyone? You get those who can afford it who want to get out” of struggling schools.

By providing busing, area school districts are opening up choice to all families — not just those who can afford to provide transportation themselves.

Williams-Harper's actions are a reminder of the way Michigan's public education system once was: Students would attend their neighborhood district, with no other available public option. But over the past two decades, enrollment through SOC has grown and now more than 100,000 students in Michigan opt to attend a school using SOC. Rather than try to take options away from families, Williams-Harper should be working to give them reasons to stay.

There is Plenty of Money in the Budget for Roads

It’s all about legislative priorities

The Michigan state budget is $54.5 billion — so why can’t legislators find an extra $1.2 billion or so for road funding?

That’s the question MLive tries to answer in a video. But they buy into a bad argument in their explanation.

Many proponents of raising taxes to increase road funding often say that the total budget number of $54.5 billion is misleading and that lawmakers have “only” about $10 billion to work with. MLive accepts this argument and assumes new spending for roads can only come from this portion of the state budget.

But that is incorrect. While it is true that the state cannot use most federal funds on roads, the rest of the state budget is still $30 billion and much of that could be used for improving transportation infrastructure. Some of this $30 billion is considered “restricted” for certain purposes, but most of these restrictions are statutory — meaning lawmakers could change the law and prioritize this money for roads if they choose.

Further, some of the restricted revenue in the state budget could be used for services currently funded with general fund dollars. For instance, the state spends over $13 billion on education through the School Aid Fund. But it also dedicates another $1.5 billion from the general fund for the same purpose, mostly as aid to public universities. Increasing the amount of money from the SAF spent on higher education would free money in the general fund to be used for roads.

There are also billions of dollars in other money currently earmarked to the SAF that could go to the state’s general fund, like the $2.4 billion coming from the state income tax earmarked by statute. This would require a discussion about education funding, but these funds are within policymakers’ direct control.

Adding these options together shows that there’s more than just $10 billion available for legislators to work with in finding more revenue for roads. And don’t forget that the general fund has increased by about $2.3 billion since 2010, while the total budget (excluding federal funds) has increased by $4.8 billion. There’s likely going to be more revenue available in the future than what is on hand today.

For more specific ideas, we have outlined more than $1.5 billion in savings from programs that offer little benefit to the typical taxpayer. And plans passed by the state House and Senate would take future state revenue and dedicate those funds to transportation first before increasing other government spending. That is money which would require no cuts to current services.

There is much to debate about how to spend taxpayer dollars efficiently. But the total budget being managed by state policymakers is much larger than the $10 billion that MLive acknowledges.

LaFaive Interview on Economic Freedom

Hosted by Think Tech Hawaii and the Grassroots Institute

Michael LaFaive, Director of the Morey Fiscal Policy Initiative at the Mackinac Center, recently joined Keli'i Akina, president of the Grassroot Institute and host of E Hana Kakou, to discuss personal and economic freedom and its impact on everyday life.

The interview is available in its entirety below.

MLive Gets Senate Roads Plan Wrong

No spending reductions required in Senate plan

An MLive.com editorial criticizes the state Senate's road funding plan, stating “It is cowardly and irresponsible for [Sen. Arlan] Meekhof and his colleagues to refuse to outline what, exactly, they will cut.”

Michigan tax revenues are growing, and both the House and the Senate road plans mean some of that expected growth would fund roads. Some $1.6 billion in expected revenue increases over the next two years would be more than enough to avoid any spending reductions while still devoting more income tax revenue to roads.

Even then, the recent Senate proposal actually calls for fewer “budget cuts” than the current budget. In the first year of implementation, it devotes $350 million of the income tax to the roads. There’s already $400 million of general fund money in the roads budget.

Despite the editorialists’ assertions, reasonable growth projections mean no spending reductions are required in the Senate roads plan. And if policymakers wanted to fix the roads without raising taxes, there are a number of places to look for savings.

July 2, 2015 MichiganVotes Weekly Roll Call

Key Senate Road Funding Votes

House Bill 4615, Increase gas and diesel tax: Passed 19 to 19 in the Senate

To increase gasoline and diesel fuel tax rates to 34 cents per gallon by Jan. 1, 2017, up from 19 cents and 15 cents respectively. With sales tax this would give Michigan the nation's second highest gas tax. The bill would also tax “alternative fuels” burned by vehicles at comparable levels. The Lieutenant Governor broke the tie with a "yes" vote.

Who Voted “Yes” and Who Voted “No”


Senate Bill 414, Earmark some income tax revenue to road repairs: Passed 27 to 11

To earmark $350 million from state income tax collections to road repairs next year, and $700 million in subsequent years. The bill also proposes a scheme to potentially roll back future income tax rates if money deposited into the "general fund" - not total state tax collections - grows faster than inflation. Note that the legislature controls the amount of these deposits, so any future rate reductions would essentially be at the discretion of each legislature, as under current law.

Who Voted “Yes” and Who Voted “No”


House Bill 4612, Road funding package - hybrid and electric car surtax: Passed 21 to 17 in the Senate

To impose an annual vehicle registration surtax of $30 on gas-electric hybrid-drive cars, and $100 on pure electric (battery) cars. Other bills in this package would tax "alternative" fuels at rates comparable to gasoline and diesel taxes.

Who Voted “Yes” and Who Voted “No”


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.

Remembering Sir Nicholas Winton

The world has lost a true hero

Sir Nicholas Winton. Image via Wikipedia Commons.

The news from England this week made my heart heavy. Sir Nicholas Winton has passed away.

The Mackinac Center first learned of Nicky when our then-President Lawrence W. Reed met and interviewed him. I will be forever grateful to Lawrence W. Reed for bringing his story to Michigan and inviting me to visit England with him to meet this exceptional man.

Sir Nicholas Winton spent the war years as Nicholas Winton and was later knighted by Queen Elizabeth for his valor, compassion and heroic measures exhibited during the fight to save children from certain death in concentration camps. He has been called Britain’s Schlindler and certainly a hero. He much preferred “Nicky” and to a vast number of descendants of the 669 children he saved and to many others who were privileged to know him, he will always be our “Nicky.”

There is much to remember about this humble, articulate man. It is amazing that someone who did so much for children he did not even know could have remained, till the very end, humble about his accomplishments. He did what needed to be done.

I was blessed to have visited with him three times. My first visit was in his home in Maidenhead (about 25 miles out of London) which included a visit to his favorite pub for lunch. The second time he joined us in London for dinner and a visit to the Royal Albert Hall. I will always remember waving the Union Jack with him as we listened to some of our favorite music. He loved opera. The third visit was in May of this year as we celebrated his 106th birthday which was within the week. He wasn’t able to wave a flag or journey to London but he still quoted poetry, had a distinct twinkle in his eye and kept us smiling with that well-known English wit. He was also saddened by the declining health of some of the “children” he saved.

It has also been my privilege to have met with three of those children — children who now live in England, Canada and New Zealand. They also have quite the story to tell. Needless to say, Nicky is a hero to them.

I also met his own son Nick Winton, who was hosted by the Holocaust Memorial Center in metro Detroit last summer. He told the inspiring story of a man who lived his motto: “If it’s not impossible then there must be a way to do it.” I am sure his narrative was new to many in that audience and am thankful that the Holocaust Memorial Center as well as the Mackinac Center for Public Policy presented this story.

This story needs to be passed on to the next generation without fail. I am also thankful that my grandchildren’s school, Corpus Christi Catholic School in Holland, Mich. learned of Nicky’s deeds.

Perhaps a quote from a letter written by Sir Nicholas Winton in 1939 says it best:

“…there is a difference between passive goodness and active goodness which is, in my opinion, the giving of one’s time and energy in the alleviation of pain and suffering. It entails going out, finding and helping those in suffering and danger and not merely leading an exemplary life, in the purely passive way of doing no wrong.”

My friend Nicky did indeed lead an exemplary life. May he rest in peace.