One way to measure a place’s success is to see what outsiders say about it. And while outsiders’ comments about Michigan are probably the least important measure of the state’s never-ending slide into the abyss, they are depressing. Whenever I hear non-Michiganders talk about my state (I’ve lived in Michigan all my life), their comments are riddled with flippant remarks about Detroit and references to the “Rust Belt.” But at least everyone gives us the token “but-it-is-a-beautiful-state-with-all-those-lakes” comment after tearing the state to shreds.
These criticisms are not unfounded or untrue. The United States has a 6.5 percent unemployment rate. Michigan’s rate stands at 8.7 percent. Since 2001, Michigan’s unemployment rate has consistently been more than a percentage point above the national average. And since 2000, the city of Detroit has lost 3.5 percent of its population and continues to slide down the list of largest cities in America. It’s no wonder that among all cities in the nation with more than 5,000 residents, Detroit is the 30th most dangerous. Then there is Kwame Kilpatrick. And the Lions.
Obviously something needs to be done to fix this state, and most people’s starting spot is the economy. But last week’s news about the Big Three’s executives traveling to Washington D.C. to beg for a bailout represents a terrible way to get back on track. That’s because, if Congress and the Bush administration coddle the Big Three, they will open a Pandora’s box of businesses asking for free money. It’s as if Matthew Lesko, author of all those books on how to get free money from the government, is now the consulting for America’s biggest industries.
Here’s a better solution: Our state government should look inward at how it has allowed Michigan industry to crumble, instead of waiting around for a Big Three bailout.
When our state looks inward, it will find one glaring problem: taxes. According to the Tax Foundation, Michigan is the proud owner of the third worst state tax climate for business. Among our 50 states, only Delaware and New Hampshire try harder than Michigan to keep business from their state. Even Taxachusetts, which came in at the fourth worst, is more hospitable to business than Michigan.
After Michigan abolished the Single Business Tax last year, it replaced the system with the nonsensical Michigan Business Tax, which includes a gross receipt tax and a business income tax. That means that the state of Michigan now taxes the net income of corporations along with the money they gross. For example, let’s say you own a business that brings in $500,000 a year but has $400,000 worth of expenses. This great state will first tax your $500,000 in revenue, and then tax you again on the $100,000 profit.
Perhaps all this talk of tax law gives you a headache. Apparently, it gives the Michigan House of Representatives one, too. The House commissioned a study in 2006 that said the state’s tax climate for business “explains growth consistently.” And yet, Michigan is still the third most hostile state toward business. Obviously, making Michigan more competitive in this regard would attract businesses and the jobs that come with them.
As Michigan considers how to move forward, there is one more thing it must realize: The idea that manufacturing jobs, particularly automotive manufacturing jobs, are simply being “shipped overseas” and will never come back is simply not true.
For example, if you told citizens of Spartanburg, S.C. that there are no more automotive manufacturing jobs being created, they would laugh. That’s because in 1992, BMW began investing a total of $2.4 billion into the area, creating jobs for South Carolinians manufacturing BMW SUVs. It’s no coincidence that South Carolina is the ninth best state to do business according to the Tax Foundation, and is a right-to-work state, meaning that workers there are free to choose whether or not they want to unionize. Loosening the United Auto Workers’ stranglehold on Michigan probably isn’t realistic anytime soon here, though.
What Michigan can do, though, is rewrite its tax laws. If it does that, there is no reason this state can’t regain its earlier prosperity. Budget deficits and a changing world economy are excuses used to deflect blame and deny responsibility. By making Michigan more competitive, it will also become more prosperous.
Alex Prasad can be reached at firstname.lastname@example.org.