With an economy highly dependent on the success of the automotive and manufacturing industries, the slow decline of state’s auto giants and the manufacturers that depend on them has led to a renewed focus on economic revitalization. Lansing recognizes that new investments are needed to keep Michigan’s economy competitive. Presented with a $1 billion tobacco settlement, state lawmakers have an opportune chance to shift the emphasis away from irresponsible cost cutting and toward a long-term economic vision focused on public investment. House Republicans, however, want to use $700 million of the settlement to finance a new set of business tax cuts the state can ill afford. State legislators should instead use the money to set an example for the future – to promote an economic strategy that emphasizes public funding and human capital, a ground-up plan that will cultivate an educated workforce and a business environment appealing for more than just its low tax rates.
Tax cuts may bring in new businesses, but they are not sufficient enough to keep them here for long. States with high tax rates, such as Massachusetts and California, boast advanced workforces and robust high-tech industries. Higher taxes, if allocated properly, translate into more funding for education and human capital, producing a more educated and appealing workforce. Unfortunately, the more money lawmakers set aside for tax cuts, the more likely the state’s institutions of higher education – the very engines of long-term economic growth – are to suffer. The advanced sectors necessary to revitalize the state’s economy flock to high-skilled, well-educated workforces. Michigan cannot afford to continue promoting its low taxes and cheap labor at the expense of education.
Examples of such failed economic models abound in the South, where states such as Mississippi and Alabama, where low taxes and cheap labor run rampant, struggle to support some of the poorest education systems in the country. If Michigan continues to follow the lead of these states, its economy will remain in a rut, with little hope of weaning itself from its decaying, low-skilled manufacturing sectors.
At the very least, the tobacco settlement could be used to help relieve the state of its oppressive health-care burden, a logical resting place for $1 billion worth of big tobacco’s money. Given a tight budget, expensive health care and pension liabilities and eroding institutions of higher education, tax cuts are the last thing the states should be seeking to finance.
It’s all about priorities, and lawmakers in Lansing can’t keep throwing lifelines at the state’s ailing manufacturing sectors. The state Legislature must be proactive in setting examples for the future, rethinking economic priorities and re-allocating money accordingly.