Having already cut funding for many state
programs, last week, Gov. Jennifer Granholm announced her plan to
cope with Michigan’s budget crisis, which includes creative
ways to raise money for the state’s coffers.
- Laura Wong
This proposed solution, intended to alleviate the state’s
budget woes, takes the wrong approach. The burden of raising
additional funds falls on those who can least afford to pay for it.
Granholm should set aside these piecemeal solutions and acquiesce
to the reality that she will have to raise the state’s income
tax based upon taxpayers’ incomes.
The first part of her proposal includes closing a women’s
prison in Plymouth Township, a move that is expected to save about
$22 million. Prisoners will be transported to other facilities
— most will be moved to a prison in Ypsilanti. This is a
reasonable proposal in Granholm’s plan to balance the
budget.
The second feature of the plan directed at closing the budget
gap is moving forward the collection of county property taxes. This
would allow counties to collect monies from their residents earlier
and offset the state’s inability to pay the full amount in a
revenue sharing plan. However, this proposal may not succeed. It
requires counties to stretch the tax revenue for an extra six
months, which will, more than likely, lead to cuts in services in
counties throughout the state.
The final feature of the budget proposal are vice taxes.
Granholm wants to raise the cigarette tax to $2, with hopes of
raising $295 million. Additionally, she plans to increase the tax
on hard liquor to generate $30 million. While these taxes could
help raise money to decrease the deficit, the brunt of these taxes
fall on those who can least afford an increase in taxes.
The problem with increasing a vice tax lies in the fact that it
is simply not progressive. A wealthy person and a person in dire
financial straits both pay the same price, which falls hardest on
those who can least afford it. If the state pursued a progressive
income tax increase — which takes a larger percentage from
those who can afford it — more money would be raised. Raising
income taxes would prove to be a more effective method of
generating much-needed funds for the state.
The new fundraising components of Granholm’s budget
proposal are creative ways of trying to solve the state’s
financial problems. An increase in income taxes offers a viable
solution to the current budget gap. It is not only a surefire
method to generate revenue, but also the best way to ensure the
budget burden falls equitably on all Michigan residents.