Tax increase is unnecessary and would harm economy, analyst says

MIDLAND – Lawmakers could close a projected $1.3 billion state budget deficit and have money left over by eliminating unnecessary spending and selling select state assets, according to a report released today by the Mackinac Center for Public Policy.

More than 90 ideas from the Mackinac Center would reduce General Fund spending by more than $1.6 billion and would gain the state hundreds of millions of new dollars from asset sales, including the sale of new “racino” gambling licenses that otherwise would be given away to gaming interests, according to the report.

“Our ideas to balance the budget can be implemented without eliminating any core state functions,” according to Michael LaFaive, the Mackinac Center’s fiscal policy director. “Hundreds of millions of dollars would be left to replenish the rainy day fund, and no tax would need to be raised,” said LaFaive. Ideas for new revenue and savings include

• $450 million to $1.6 billion – sell instead of give away new “racino” gambling licenses;

• $313 million – reduce state revenue sharing to within $313 million of its constitutionally established level;

• $282 million – redirect tobacco settlement revenue to the General Fund;

• $60 million – sell the state fairgrounds;

• $10 million – sell the McMullan hotel/conference center on Higgins Lake;

• $327 million – stop the School Aid Fund subsidy entirely (Gov. Granholm’s modified budget reduces it to $139 million); and

• $150 million to $400 million – repeal the state’s “prevailing wage act” which increases construction costs on public projects. Exempting schools alone from the act, as Ohio has already done, would save public education $150 million annually.

Michigan business leaders joined the Mackinac Center as it released its report in the Capitol rotunda in Lansing. Speaking in favor of less state spending and opposed to tax hikes were representatives from the Michigan Chamber of Commerce, National Federation of Independent Business (Michigan), Small Business Association of Michigan, Michigan Association of Home Builders, Auto Dealers of Michigan, Michigan Bankers Association, Michigan Grocers Association, and the Michigan Restaurant Association.

LaFaive said, “Lawmakers who want to raise taxes are really just shifting the decision to cut spending from themselves to Michigan families and businesses. Where do lawmakers think the people should cut their spending to pay for a tax hike? Should they buy less food? Move to lower-cost neighborhoods? Purchase fewer books? Should businesses raise prices for their products? Should employers pay their workers less?”

The Mackinac Center for Public Policy is a nonprofit, nonpartisan research and educational institute. Its 93-page budget report is available at www.mackinac.org/S2004-02.