Still addicted to tax cuts

By • on October 28, 2013

In a previous post I explored the nearly two decade bipartisan addiction Michigan policy makers have to cutting taxes. The latest evidence of the continuation of the addiction is the near unanimous vote by both houses of the Michigan legislature to impose the sales tax on the difference between the sale price and trade in price of motor vehicles (mainly cars). As usual the “justification” for the tax cut is that it will create more jobs. As usual that claim was made without any real evidence.

Where there is evidence is that the tax cut will reduce spending. According to a Senate Fiscal Agency analysis “the revenue loss under the bills would grow roughly $23.3 million per year, eventually reaching $233.4 million in FY 2022-23 and lowering School Aid Fund revenue by $152.8 million, General Fund revenue by $43.9 million, Comprehensive Transportation Fund revenue by $8.7 million, and constitutional revenue sharing to cities, villages, and townships by $28.1 million.”

As I wrote in my previous post, this tax cut, “just like those of the last two decades, would have the same effect: diminish the state’s ability to make public investments in education, infrastructure and quality of place. The things that matters most to growing the economy. Saying you are in favor of these public investments while proposing large tax cuts with no replacement revenue means you are not really in favor of increased public investments in education, infrastructure and quality of place.”

Once again what is most discouraging is the lack of debate about the consequence of the spending cuts. There is a strong case to be made that public investments, not tax cuts, are the policy levers that matter most to the more and better jobs that Governor Snyder has set as the goal for the state.

Michigan has been trying to tax cut its way back to prosperity for nearly two decades. It hasn’t worked so far and almost certainly won’t in the future. At the very least its time for a robust debate about whether to move to a public investment led economic growth strategy.

 

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