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Wednesday, April 13,2011

Snyder's plan may not create any jobs

by Kyle Melinn

Even the Snyder administration is not guaranteeing the governor’s budget plan will create any jobs.

With all the rigmarole surrounding Snyder’s plan to cut business taxes 85 percent by eliminating $1.86 billion in personal income tax exemptions, whether it will create jobs is the one question nobody seems to have the answer to.


On Tuesday, it was learned Snyder, Senate Majority Leader Randy Richardville and House Speaker Jase Bolger agreed on a revamped way to get rid of the Michigan Business Tax by softening the impact of the "pension tax," but what will be pushed through the Legislature is still more than 90 percent Snyder’s original plan.


The head of the nonpartisan House Fiscal Agency, Mitch Bean, told the Michigan Municipal League last week that there are no guarantees for jobs under the Snyder formula.


Yes, businesses will pay $1.73 billion less in state taxes, dropping Michigan’s business tax burden from 19th to 35th among the 50 states, according to a Citizens Research Council report.


But who’s to say businesses won’t simply use the money to buy more equipment, update their technology or make other improvements that they’ve been putting off for the last several years? Business owners, many of whom have been taking reduced salaries during our state’s prolonged recession, may treat the state tax relief as their personal payday.


"The idea that somehow this business tax would automatically create jobs in Michigan is nonsense," Bean said.


He’s not the only one with doubts.


Speaking before the Lansing Regional Chamber Economic Club a few days ago, Snyder himself gave a bit of a mixed message on his plan to scrap the fledgling Michigan Business Tax in favor of a flat 6 percent corporate income tax.


At first, the governor declared "it will work" to revitalize Michigan, but several minutes later he said he "can’t guarantee results."


Snyder doesn’t want to be painted into a corner by declaring his tax plan would create some wildly exaggerated number of jobs, something his predecessor tended to do. There’s no point in inventing a concrete statistic which the media and critics can use to judge the plan’s perceived success or failure.


But if we’re all going to be paying more on our income tax returns next year, it’d be nice to have some assurances that our "shared sacrifice" will mean jobs for the unemployed, that the foreclosed home next door will sell and that our economy will actually rebound.


Snyder is asking for us to have faith. This isn’t about having faith, necessarily, in Snyder and Republicans, though.


Read what Lt. Gov. Brian Calley said last week:


"We don’t believe that government creates any jobs. What we do believe is that our plan will create an environment that is likely to encourage job growth."


Michigan is not putting its faith in Snyder. It’s putting its faith in the business community.


For as long as business organizations have stomped around Lansing, the rhetoric has been the following: Fewer taxes Decreased government regulation = More jobs.


We didn’t necessarily see that in the 2000s when Gov. John Engler and, later, Gov. Jennifer Granholm’s seemingly endless list of tax cuts couldn’t save Michigan from 10 years of painful recession.


We’re told that nothing couldn’t have saved the domestic auto industry from the bath it took. We’re told not having the tax cuts in place would have made Michigan’s economy worse.


When Snyder’s plan — which has received rare unanimous support from business groups — is signed into law in the coming weeks or months, the business community will need to put up or shut up.


Because once the Michigan Business Tax goes, the Snyder administration has already given every indication that the personal property tax on mostly manufacturing equipment is the next dragon to be slayed. In fact, there’s a pot of money created in the Snyder budget designed to offset the loss of revenue created by the property tax’s elimination.


And once it goes, there aren’t a lot of business taxes left to cut. There just won’t be.


Is this "economic gardening" going to coax business leaders into our state or will the business community’s argument about needing a tiny tax rate be exposed as humbug when private-sector decision-makers recoil at our crummy roads, disinvested schools, depleted police force and sky-high university tuition rates?


Snyder believes it in his tax plan. He thinks he’s holding a Royal Flush.


He’s not only pushed his own political future into the middle of the table, he’s gambling the future of dozens of Republican state legislators.


They’re the ones who stand to lose in 2012 if businesses simply take their millions in newfound tax relief and run.


(Kyle Melinn is the editor of the MIRS Newsletter. He can be reached at melinnky@ameritech.net.)




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