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Letter


An Open Letter to the Michigan Legislature: Tax Cuts Are the Key to Michigan's Economic Recovery

August 2, 2005

Dear Legislator:

On behalf of the more than 11,700 members of the National Taxpayers Union (NTU) in Michigan, I urge you to consider reducing the overall tax burden on Michigan citizens and businesses. At 6.8 percent, Michigan's unemployment rate is the second-highest in the nation and the state has been an economic laggard for years. Finally, elected officials are discussing ways to boost the state's economy, but much of the debate has focused on shifting revenues from one source to another. Michigan's real problem is that taxes and spending are too high, not that they are being collected inefficiently or from the wrong people. Michigan needs to immediately cut the taxes and spending that are stifling economic growth or the state will only fall further behind.

State Representative Rick Baxter outlined one prescription for economic recovery that included: reducing the single business tax from 1.9 percent to 1.7 percent, providing a personal property tax credit for all businesses, changing the single business tax formula to be 100 percent based on sales, and eliminating the tax employers must pay for providing health care to their employees. If legislators are willing to put aside the false promise of "revenue neutrality," passage of these modest cuts would help to jump start the state's sluggish economy.

Decades of experience combined with economic data have shown that in Michigan and in the rest of the nation, lower taxes are an economic boon. Just as we have recently seen economic growth improve nationwide due in large part to lower federal taxes, Michigan saw its economic situation improve dramatically in the early 1990s when Governor Engler and the Legislature cut taxes and reduced spending. This action proved to be the catalyst in turning a $2 billion budget deficit and 11.5 percent unemployment rate into a $1 billion surplus and 4.5 percent unemployment rate.

Michigan has raised taxes several times in the last few years and has done too little to make the state an attractive place to do business. The Governor's plan to borrow $2 billion in bonds in order to help a few chosen businesses get off the ground while others suffer from high taxes and slow economic growth is also misguided. Only lower taxes will stop the state's economy from bleeding! Michigan's economic health is showing signs of recovery as tax collections have been far higher than expected. The best way to continue this improvement is to hold the line on spending and cut taxes.

Sincerely,

Paul J. Gessing
Director of Government Affairs