Michigan Government Revenue Forecasted to Increase, But …

Yesterday, forecasters from the Michigan House Fiscal Agency, Senate Fiscal Agency and Treasury Department met to agree on an estimate for the next fiscal year's state revenues. These revenues are important because coupled with spending figures, they tell us whether fiscal 2011 will result in a surplus or deficit.

Despite Michigan's poor economy, state government revenue is expected to increase from this year to next. Nevertheless, the state is expected to spend $1.6 billion more than it receives in revenues.

The deficit figure, as well as an updated forecast in May, will be the essential driver for any tax-hike campaign this year. There is already news of a grand bargain of tax hikes and shifts among Lansing policymakers, all without public debate so far.

But a tax hike would mean that Michigan workers and job providers would be forced to give more to the state just as they hit bottom. Indeed, since June 2000, Michigan has lost 840,900 jobs. The state has wiped out all of its job gains from the '90s — and then some.

It's actually a testament to the robustness of Michigan's tax system that the deficit is so low. In the first three quarters of 2009, Michigan tax revenues were down 9 percent, while the national average was down 13 percent — and this despite the state's losing a greater percentage of its jobs than any other state.

The projected budget deficit is a result not of the tax system, but of increased spending. So to overcome it, the state should focus on spending reforms like these.

Permission to reprint this blog post in whole or in part is hereby granted, provided that the author (or authors) and the Mackinac Center for Public Policy are properly cited.