Republican Lt. Gov. Dick Posthumus says Michiganders' tax dollars are at stake in the 2002 governor's race. And while Posthumus and Democratic opponent Jennifer Granholm promise to keep cutting taxes, some observers say more tax cuts are not possible.

One of the major issues the next governor is likely to face is how to deal with a projected $1.2 billion deficit in the state budget over the next two years.

Two major state taxes, the income tax and the Single Business Tax, normally decrease .1 percent each year. But with the economy and state revenues creeping downward, the cuts in the SBT were halted as required under state law. Granholm, the state attorney general, and Posthumus have said they want to restart the cuts. In addition, both oppose halting any cuts in the income tax as some have proposed.

But Thomas Clay Jr., a former state budget director and assistant state treasurer now with the Citizens Research Council of Michigan, an independent think tank, said restarting the SBT cuts with the budget in its present shape is bad policy.

"In order for the state to solve its budget problem for the year that began (Oct. 1) without doing something on revenue will require some fundamental changes in the nature of state government," Clay said, noting that thousands of workers have already been laid off to deal with the budget deficit and that any future cuts would likely be aimed at education, health care and crime prevention.

The income tax rate is currently 4.2 percent and the business tax is currently 2.1 percent. Neither candidate advocates any change in the 6 percent sales tax.

Others say pausing the cuts will exacerbate economic and budgetary problems in the state, believing that tax cuts spur the economy and thus drive the engine that pumps revenue into the state treasury.

For that reason, Michael LaFaive of the Midland-based Mackinac Center for Public Policy supports Posthumus' proposal to require a three-fifths majority approval by both houses of the Legislature before any state taxes can increase. He believes more cuts in state government are doable.

"When you have tens of thousands of state employees, they have a vested interest in maintaining their jobs, and special interests have a vested interest in maintaining their programs," he said.

But Posthumus' idea for such an amendment to the state constitution has far less than unanimous support. Clay and state Sen. John "Joe" Schwarz, Posthumus' unsuccessful opponent in the GOP primary, said such a proposal is undemocratic.

"What supermajorities do is give absolute power to minorities," said Schwarz, a term-limited Battle Creek lawmaker and vice chair of the Senate Appropriations Committee. "We are a majoritarian government and this is something that every thinking person should oppose."

One of Posthumus' key themes is an allegation that Granholm, if elected, will raise property taxes. Property taxes have been frozen since a 1994 ballot initiative. Granholm says she wants to "tweak" Proposal A, the ballot initiative, but said any tweaking does not involve tax increases. State Republicans have set up a website, www.taxtweak.com, to bolster those ideas.

Granholm said during her debate with Posthumus Monday night that the only tax increase she supports is a raising of the diesel tax.

Granholm, in turn, says fiscal policies advocated by Posthumus when serving as lieutenant governor and as a state senator have caused the present state budget deficit, expected to be about $600 million for this year.

The Michigan State Police currently has 1,180 posted troopers, while it says the optimal number is 1,350.