We Made The Wall Street Journal

[Gillespie]

Wall Street Journal (Editorial)
Hail to the Taxers
October 2, 2007
Actor Jeff Daniels makes a cool pitchman in those national TV spots
inviting business to Michigan, but soon he may have to start pitching
inside the state. At about 2 a.m. Monday, a handful of Republicans in
the Legislature broke days of gridlock and handed Democratic Governor
Je nnifer Granholm the $1.48 billion tax increase she has been
demanding.

The state's personal income tax will rise to 4.35% from 3.9%, and the
rest of the revenue grab will come from a new 6% sales tax on business
services. Already 14th in tax burden among the 50 states, according to
the Tax Foundation, Michigan is now headed up in the rankings.
Congratulations.

The Michigan Chamber of Commerce estimates that two-thirds of the $750
million in new sales tax revenue will apply to business transactions
that are tax exempt in most states to avoid a compounding effect that
raises costs to final consumers. The tax is especially unfair to small
employers that contract out for activities, such as office services,
that large businesses provide in-house with no sales tax applied. By the
way, last year Michigan introduced a new 4.95% business income tax,
which will be applied on top of the sales tax.

Last year, amid the national expansion, Michigan was the only state
outside the Gulf Coast to lose jobs and see a decline in economic
output. Comerica Bank recently moved its headquarters to Texas , in part
because of Michigan's hostile business climate. Michigan's 7.4% jobless
rate is the highest of all states and far above the 4.6% national rate.

The state is suffering from the decline of Detr oit 's car makers, but
that's all the more reason to promote policies that attract new
businesses -- or at least don't drive current employers to Florida. Ms.
Granholm argues that the combination of new taxes to balance the budget,
and to finance such new public "investment" as job retraining and
education, will reinvigorate Michigan.

She should check her history books. In the past 25 years, the only
period when Michigan's growth has exceeded that of the national economy
was in the mid-1990s after then-Governor John Engler's tax cutting and
welfare reform. For a time, Michigan became the unlikely national leader
in job creation. Now the total tax burden is returning t o where it was
before the Engler years.

Michigan last went on a taxing binge in 1983, and voters were outraged
enough to mount a successful recall campaign against two state Senate
ringleaders. This time, two of three Michigan voters have told pollsters
they want budget cuts, not new taxes. It may be that the only way to get
jobs back into Michigan is to make sure the taxing politicians in
Lansing lose theirs.

[Chamber of Commerce]

We should be pleased that vacation travel to Beaver Island is only not growing vs down as in many north country (Fudge Island) vacation location. Beaver Island is holding it's own in Michigan, the France of the United States.

[TjD]

If only our problems were so simple, Richie. Michiganâ??s current problems are more a result of globalization than our stateâ??s taxation. Slashing services and lowering taxes will not bring a slew of new jobs to our state that will make up for all the jobs sent overseas What the state needs now is leadership from both parties to craft a balanced and well thought out approach that addresses the stateâ??s current and future needs. What we donâ??t need is political opportunist exploiting our problems to push their political agendas.

The following excerpts are from The Tax-Cut Con The New York Times ,September 14, 2003, By PAUL KRUGMAN
â??An excellent article on right-wing radicals, the regressive tax cut agenda, and The Great Unraveling of the system we have had since Franklin Roosevelt that they want to bring about â??

â??So here's the picture: Americans pay low taxes by international standards. Most people's taxes haven't gone up in the past generation; the wealthy have had their taxes cut to levels not seen since before the New Deal. Even before the latest round of tax cuts, when compared with citizens of other advanced nations or compared with Americans a generation ago, we had nothing to complain about -- and those with high incomes now have a lot to celebrate. Yet a significant number of Americans rage against taxesâ?¦.â?￾

WHY?

â??Here's how the argument runs: to starve the beast, you must not only deny funds to the government; you must make voters hate the government. There's a danger that working-class families might see government as their friend: because their incomes are low, they don't pay much in taxes, while they benefit from public spending. So in starving the beast, you must take care not to cut taxes on these ''lucky duckies.'' (Yes, that's what The Wall Street Journal called them in a famous editorial.) In fact, if possible, you must raise taxes on working-class Americans in order, as The Journal said, to get their ''blood boiling with tax rage.''
So the tax-cut crusade has two faces. Smiling supply-siders say that tax cuts are all gain, no pain; scowling starve-the-beasters believe that inflicting pain is not just necessary but also desirable. â?¦.
A look at who the supply-siders are and how they came to prominence tells the story.
The supply-side movement likes to present itself as a school of economic thought like Keynesianism or monetarism -- that is, as a set of scholarly ideas that made their way, as such ideas do, into political discussion. But the reality is quite different. Supply-side economics was a political doctrine from Day 1; it emerged in the pages of political magazines, not professional economics journals â??

[RickB]

Maybe we can qualify for foreign aid or some sort of a grant?

[TjD]

Gee Rick you seem to take this about as serious as our representatives in the State Senate and House do. Either we should elect Rick to represent us or push for a part time legislature. The representative bodies in Lansing have had all year to deal with this issue and Rick's suggestion is as productive as theirs'. What are we paying them full time salaries for? Private fund raising?

Some other possibilities to solve our state budget crisis were listed in the Detroit Free Press:

FREE PRESS EDITORIAL
Fix the services tax
Lansing should seize an opportunity to improve on a tax it rushed through last month
November 4, 2007
An unexpected gift arrived at the state Capitol last week as major business groups offered to accept a temporary rate hike in the new Michigan Business Tax if Gov. Jennifer Granholm and the Legislature will drop their ill-conceived services tax and go back to the drawing board on revenue.
Assuming the dollar numbers work out so that the state budget can stay intact, everyone involved should grab this offer to start over. It's the opportunity of a lifetime -- a term-limited lifetime, anyway -- to make a substantive, proactive change in state tax policy.

The 6% services tax, as it emerged Oct. 1 from an overnight legislative session that ran past the deadline for a state government shutdown, is capricious, complicated and potentially burdensome to businesses big and small. It taxes an odd mix of services and exempts others, based, evidently, on legislative perceptions of what sort of spending for services is discretionary as opposed to necessary -- and on who had the loudest lobbyists when the tax plan was being duct-taped together.
Now, because services represent an increasing part of the economy, while sales of hard goods show much less growth and thus generate less sales tax revenue, it is, actually, time to consider moving to a service tax. But that could be done at a lower rate if the tax burden was spread across all services -- not a select bunch -- and combined with changes to the Michigan Business Tax that recognize how service taxes affect companies.
This kind of thinking might produce a plan quite similar to the two-cent service tax proposal that Gov. Jennifer Granholm offered way back in February. Or a services tax could be meshed into the state sales tax with an appeal to voters to lower the rate but include services in the base.
Another potential solution, which lawmakers should not dismiss, is asking voters to amend the state Constitution to allow a graduated income tax.
What lawmakers cannot do is dither. They face a petition drive to repeal the tax. The state Senate has already passed a bill to delay the tax's implementation from Dec. 1 to Dec. 20, although there's no good reason for lawmakers to dodge the decision that long.
Lansing's elected officials should take this temporary trade-off, and then immediately run the numbers on the various long-term options, hold hearings, and talk with constituents. In particular, lawmakers need to come together on a proposal as a Legislature, not as Democrats or Republicans, so voters understand that they have chosen a tax plan that they believe is good for the state as a whole, not just for their own partisan politics.
Granholm's February tax plan caught too many people by surprise because she did not include enough of them in her planning of it. It was quickly shot down in the Legislature. But legislators then dumbfounded even more people with the dark-of-night some-services tax. If a temporary trade-off with the business tax works, it will be time to bring serious proposals out into public view, with plenty of time for everyone to dissect them, discuss them, and, if needed, present them to voters next August or November.

Michigan Single Business Tax
For any business tax that may eventually replace the Single Business Tax, the Detroit Regional Chamber will advocate for a competitive business tax that reduces the cost of doing business and promotes economic development in Michigan
BACKGROUND
Michigan adopted the Single Business Tax (SBT) in 1975. It is a value-added tax that replaced the corporate income tax and six other business taxes. The SBT raised approximately $2.2 billion for the state in FY 02-03. This represents about 6% of all state revenue.
Under current law, the SBT is scheduled to be completely phased-out by 2009. The rate is reduced by 0.1% each year. However, the phase-out has been paused for two years to allow the state budget to stabilize.
ANALYSIS
Gov. Jennifer Granholm has called on the state treasurer to review Michiganâ??s current business tax structure and explore potential alternates to the SBT. She has asked the business community to play a prominent role in this process and has identified Dick Blouse as a key advisor.
As the discussion over Michiganâ??s business tax climate gets underway, the Chamberâ??s Tax Policy Group recommends the following broad guiding principles:
â?¢ The state should proceed in a thoughtful and deliberate way. The state legislature and Governor must build consensus within the business community before adopting a new form of business taxation.
â?¢ The state should pursue efforts to lower the costs of taxes and determine the appropriate amount of business taxes needed for the state budget, relative to all other sources of revenue.
â?¢ Review of business taxes must take into consideration all costs of doing business in Michigan, including local taxes and fees and benchmark against the costs of other states.
â?¢ Any replacement tax should not generate more business tax revenue than business taxes being replaced.
â?¢ Tax compliance must be simplified.
â?¢ Small businesses under $350,000 in gross receipts should be exempt.
â?¢ The tax burden should be spread equitably among the business community.
â?¢ Incentives for economic development (e.g. MEGA) must be continued.
â?¢ The tax structure should be a stable revenue source for the state.
â?¢ Employer provided health care benefits should not be taxed.
A replacement tax or expenditure cuts for the $1.8 billion generated annually by the SBT have not yet been determined.
.

[Gillespie]

"If only our problems were so simple, Richie. Michiganâ??s current problems are more a result of globalization than our stateâ??s taxation."

I wonder why the rest of the country is doing so well with 4.6% unemployment: in reality about zero. I wonder why there are so many new auto plants in the ugly boring state of Indiana. I guess globalization is only bad for Michigan but good for the rest of the country.

â??So here's the picture: Americans pay low taxes by international standards."

Yes indeed we do and have the highest standard of living. The TOTAL tax take in Sweden is 50% of GDP. In the socialist disaster France it's 44% of GDP. Here all forms of taxes take about 27% of GDP.

How high shall we go? 30% 35% 40% of GDP How high? Pick a %%%%%% ?????????

Perhaps someone can explain why after the current round of federal "tax cuts for the wealthy" total tax income to the federal government is at a record high?

"Supply-side economics was a political doctrine from Day 1; it emerged in the pages of political magazines.........."

The economic track record says it works. The more you tax something the less you get of it. That includes work. A whole lot fewer folks smoke when they cost $6.00 a pack. Wonder why?

Retired former Gov. Milliken is about 85 now isn't he? Nice fellow.

Maybe if we leveled the playing field on taxation we could raise the necessary tas funds. Do people reading this forum know that retired Governor Milliken and all retired state legislators and workers on down to educators do not pay state income tax on their retirement income?? Although all in the private sector pay these taxes, people on public payrolls apparently have a pass, a pretty nice perk wouldn't you say? Here is a quote from my request for information: From the House Fiscal Agency analysis of House Bill 4801, which would repeal the public pension tax break:

"Currently, Section 30(1)(f) of the Income Tax Act of 1967 allows most forms of public employee retirement and pension benefits to be subtracted from taxable income for the purposes of Michigan income tax law (to the extent included in adjusted gross income for federal tax purposes). This deduction applies to benefits received from public retirement systems created by the State of Michigan (or its political subdivisions) as well as benefits received from pension systems created by other states and political subdivisions (to the extent that other state's income tax laws permit a similar deduction or exemption for retirement benefits earned from Michigan public retirement systems)."

A clarification by request: "Correct - income from public pensions is not subject to state income
tax. JM"

Further, I did not post the Wall Street Journal Article as a partisan stunt. I only did so to show how we are being viewed in other places. I tend to be conservative in my thinking and in being elected to public office in the past had to declare a party. I did not want to but primary rules required it, a requirement I loath to this day. If anything I am Independent and intend to stay that way unless I have the opportunity to run in an election.

The "sell job" that is always given to we, the taxpayer, is that this is only a little bit more but when you take all taxes that are inched up all around us and fees and permits and on and on it is climbing at a far faster rate than anyone sitting home collecting a pension could imagine. It is disasterous for people in business who are trying to help others get their cottage in the woods. Our fine legislators in Lansing simply stalled the solution to the tax hike to the last minute and, as they have in the past, crammed it down our throats because there was no other choice. And, although the Republicans in large part did not vote in support they didn't filibuster and stop the increase did they?? Payday must have been just around the corner. We need to reset the table in a big way!

[TjD]

The State & local tax burden as a percent of income for Michigan in 2004 was 10.2% and in Indiana it was 10.1%. I doubt that the one tenth of a percent less in of taxes explains why Indiana has why "so many new auto plants..."

While I'll agree that lower taxes can improve the economic climate it doesn't always hold true and there are many other factors that come into play. Michigan has lost a lot of jobs in the tooling and small part suppliers areas, most of these jobs are going overseas not to neighboring states. Jobs are leaving Michigan and going to places where labor rates are cheaper among other things.

Michigan's auto industry has been centered around US companies,who's product / profit strategy was centered around large gas guzzling SUV's. As gas prices have risen GM, Ford, & Chrysler have suffered and so has Michigan. The sharp rise in gas prices is in part attributable to globalization.

Sure Indiana was chosen by Honda for a new auto plant that should be completed in the next year. But, "Honda's main reason for choosing Indiana was not cash but logistics, analysts said." http://www.iht.com/articles/2006/06/29/ ... /honda.php. Honda also is building an engine plant in Canada that has a much higher tax rate than Michigan.

As far as the rest of the country is concerned they do have less unemployment but if you ask the residents of those states how great things are I think most will disagree with you Richie. "Consumers are worried and getting more worried.
Their view on current economic conditions has been lower only once during the past 15 years -- when the United States invaded Iraq in 2003, according to a survey released Friday by Reuters and the University of Michigan. "..."And despite the fall in consumer sentiment, some segments of the U.S. economy are booming -- particularly export firms, which are benefiting from the falling dollar." By Ruth Mantell, MarketWatch.

"How high shall we go? 30% 35% 40% of GDP How high? Pick a %%%%%% ?????????" I'm not arguing to greatly increase taxes. all that I'm saying is that to blame our problems on the tax rate and to think that lowering the tax will fix what ails us is an oversimplification

[Dan Wardlow]

"Yes indeed we do and have the highest standard of living."

That's arguable on many counts: longevity, infant mortality, quality of and access to healthcare, personal savings, personal debt, education outcomes, labor efficiency, care for the elderly ... the list goes on where the U.S. is NOT number one. Gosh, Canada beats us on longevity, infant mortality, and healthcare quality and access.

[dougbo]

The personal savings rate went from 9% in 1992 to .9% last month. It dipped into negative territory a few months in 2006. We are an 80% service sector country that spends right around what it earns, and owes a trillion dollars to China.

This is a country that has lots of great things... wonderful people, amazing natural resources. We aren't feeling it just yet, but the economy... not so much.

http://blogs.telegraph.co.uk/business/a ... esbrew.htm

As for taxes, it's true we're above Mexico and South Korea and below Slovakia, all down at the bottom of the tax-as-percent-of-GDP list. Yay us.

It's only anecdotal but, having lived in a partially Socialist country for a little while, I can say the quality of life was quite nice... at the time at least. The effect of the taxes wasn't onerous. It is, after all, a question of quality of life, the time you can have with your family, etc. How you get there is just implementation.

[Gillespie]

I have had this emailed to me so many times in the last week, and, although folks should post things on their own I decided to post and let people decide for themselves: Date: Sat, 10 Nov 2007 13:41:39 +0000

Interesting Information for People Who Live In Michigan



A little research, this can't be true?

1. Gov. Granholm is the 3rd highest paid Gov in the country at $177,000 in salary. This does not count her $60,000 expense account. Only the Gov. of New York and California make more than her!

2. Gov. Granholm's husband has 3 assistants paid by the state. The highest paid assistant makes $117,000 a year.


3. Our state Congressmen and Senators are the 2nd highest paid at $79,650 in salary. This does not count their $20,000 expense account. Only California legislators make more.


4. Our teachers are the 3rd highest paid teachers in the country


5. Our cigarette tax is the 4th highest in the country


6. Our Corporate Income Tax rate is the 7th highest.


Funny how we don't have enough money to pay our bills and the only answer is for us to pay more in taxes, when our public servants are getting fat on our sweat!

[BobTidmore]

From the Detroit News. My math says 200 million divided by 4000 jobs equates to $50,000 per job "saved"! Saved is a government term I don't fully understand.

Once again the government demonstrates why it's "better" for our State when they spend my money rather than let me spend it.

Detroit's gain, Livonia's loss[/b]

Nolan Finley's Blog[/b]

You have to wonder how Livonia feels about all the celebrating over the decision by Quicken Loans to abandon that community and bring its 4,000 jobs to downtown Detroit

Quicken is a major employer and taxpayer in Livonia, and it will leave behind a massive campus in the middle of the city's commercial district, and a big gap in the city's tax revenues.

Livonia (where I'm a homeowner) had been working hard to retain Quicken. But as it turns out, state officials were working hard against those efforts and on behalf of Detroit.

The state will suspend most of its business taxes for Quicken, as will the city of Detroit -- $200 million in incentives over 20 years. This is a net loss of tax dollars for the state, since Quicken was paying taxes in Livonia. And Livonia residents will now see their state tax dollars used to create a giant hole in their community.

[Gillespie]

This started out as the posting of an article in a New York Newspaper, not MY opinion. My only intention at the time was to point out how we were being viewed from afar. From your position Ken, as a retired public employee I am certainly not surprised but as someone in business I feel far differently, so much so it feels like being under attack! Bill Milliken is a heck of a guy, knew him actually, was in his office with my father but even Bill Milliken has been collecting a dandy retirement from the taxpayers of the state for over 20 years so his opinion could be a little slanted................... Here's another recent posting which I will follow with another:

Posted by Daniel Howes on Wed, Oct 31, 2007 at 2:30 PM
Budget cut? What budget cut?

It's somehow reassuring, isn't it, to know that Beltway-think is alive and well in Lansing, where a state budget that's $760 million larger than last year's is the austerity budget Michigan needed to avert yet another shutdown.

Except that it's really not, at least not to many in the real world.

"Thanks mainly to an increase of nearly $1.5 billion in taxes, lawmakers approved $9.862 billion in general fund spending, up 8.5 percent over last year's budget," The Detroit News reported today. "The 2006-07 budget was reduced by spending cuts and stop-gap measures. Gary Olson, director of the Senate Fiscal Agency, said ... that's misleading, because last year's spending base was depleted by a 11th-hour cuts, delayed payments and other one-time measures.

"'Adjusted for that, it's about a 3.5 percent increase,'" Olson said.

Oh, that clears it up, here in the land of the economically illiterate. Highest unemployment rate in America? Levy an arbitrary tax on services. Declining housing values? Raise the state income tax. Intensifying pressure on public revenue? Grant pay raises to state employees because they've already been negotiated and, well, reopening a collective bargaining agreement is too hard, too divisive.

Really? Tell that to the United Auto Workers, whose leaders a) opened contracts with General Motors and Ford Motor two years ago to craft concessions on retiree health-care and b) this fall are negotiating landmark deals with the automakers that are removing billions in unfunded liabilities from the companies, ensuring retiree health care, improving cash flow and reversing Wall Street sentiment on Detroit's debt and equity.

Who are these politicians in Lansing kidding?

And in today's Free Press: "Despite more than $430 million in savings and cuts, the 2007-08 budget is $760 million larger than the previous year's because of employee pay raises, inflationary costs and other spending increases."

All of which means this, folks: The financial train wreck that is the state of Michigan still is a train wreck. But for $1.3 billion in new taxes and a service tax that has enraged business enough to galvanize opposition -- even to the point of forcing Detroit's automakers to stand with others in opposition -- the state would be in receivership.

We'll be back here again next year. We'll hear more dire predictions from Tom Clay at the Citizens Research Council, which already is projecting a freshly dug $500 million budget hole by 2009. We'll hear more blame for John Engler, Dubya, free-trade deals and the Japanese yen, the Republicans, the Democrats and the unions.

We'll also have a governor and a state Legislature with an appallingly bad record at managing the state economic environment, no matter how charitably you shave the facts, preparing to do so again. Reminds you of the Detroit Lions, circa Marty Mornhinweg. To wit: Pass a 6-percent tax on services that just about every sector of the business community loathes, which, by the way, provides the jobs that generate tax revenue and -- gasp! -- economic growth, paltry as it is.

Or this: Grind the government to a halt a month ago over the issue of pooling health-care benefits for school teachers to get where? Will districts see the savings? When? How much? What about dismantling prevailing wage laws, a sop to the building trades? Or converting defined-benefit plans for new teachers to 401(k)-style defined-contribution plans?

Like the anti-Detroit coastal crowd controlling Congress these days, the governor and the Legislature are following the path of least resistance in their efforts to paper over irreconcilable structural differences. The path runs through two pockets -- average taxpayers and business -- and avoids, whenever possible, the special interests that fund campaigns, control government and lobby lawmakers. Yep, sounds just like Washington.

"The big picture," says Jack McHugh, senior legislative analyst for the Mackinac Center for Public Policy, "is higher spending and maintaining the government's status quo -- despite the state's declining employment, its falling home values, its stagnant or declining population and Michiganians' decline in real income since 2001.

"Remember that while the state will have fewer prisoners than expected, gross prison spending is up, and prison guards will still be paid almost a third more than the national average. State government employees are still getting raises. Public school employees will still get costly defined-benefit pensions, and they will still receive retirement health care benefits that are nearly unheard of in the private sector. State universities still face no state budget incentives to contain costs, either. You have to wonder what policymakers meant by their dire warnings of a 'crisis.'"

But you don't have to wonder how they'll manage it. Now we know.

[Gillespie]

Thursday, November 8, 2007
Opinion
State budget preserves status quo government
Jack McHugh

For the past year, the public was told that even with nearly $1.4 billion in new state tax increases, severe cuts would be required to "balance the budget." Surprise! Michigan's "deficit" turns out to have been a gap between expected revenue and the level of desired additional spending.

The state will spend $900 million more this year than last, most of which is from state taxes and fees. The following items from the just-passed budget illustrate the pattern:

â?¢ Total prison spending will be $2.01 billion, compared with $1.94 billion enacted last year.

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â?¢ Universities will receive a net increase in their operations grants of $14.4 million.

â?¢ The Department of Labor and Economic Growth will spend $1.3 billion, compared with $1.23 billion last year.

â?¢ The Department of Community Health will spend $12.05 billion, compared with $11.02 billion last year.

â?¢ The Department of Human Services (welfare) will spend $4.59 billion, compared with $4.47 billion enacted last year, and the department will gain 171 employees.

There were a few cuts: Arts grants will fall $2 million, four prison facilities will close and a juvenile justice facility will downsize, to name a few. An attempt to contract out the state's foster child and adoption services to private social service agencies will be implemented to some degree, but much less than was hoped for.

That half-a-loaf foster care reform is a good example of how the political establishment's priorities are misplaced. Despite bipartisan recognition that money could be saved and better outcomes realized for children from troubled backgrounds, what appeared to trump everything was the possibility that outsourcing could replace about 800 government workers.

The same calculus has stymied every recent effort at bringing about transformational government restructuring, from prison privatization to devolving State Police road patrols to less costly county sheriffs.

The debate over these reforms is not ideological. Neither liberals nor conservatives benefit from paying corrections officers wages that an American Federation of Teachers survey shows are almost one-third above the national average for corrections employees.
Why so few reforms?

The education of children is not advanced by granting school employees benefits so extraordinary that even a state panel chaired by former Govs. Jim Blanchard and William Milliken suggested they be scaled back.

The public is not served by a budget that includes $150 million for raises to state workers -- members of a class that on average already earns substantially more than Michiganians in the private sector, even in many apples-to-apples job comparisons.

Given the troubling state of Michigan's economy, one would expect state government's top priority to be finding ways to do more with less and make Michigan a place that encourages entrepreneurs and investors, rather than drives them away. However, the just-concluded budget saga demonstrates that the real priority is to preserve the government status quo, quite literally at all costs.

This raises a disturbing question: Who runs state government? Most people would answer "the governor" or "the Legislature," but lawmakers are beginning to look like the agents of a different set of bosses -- the state's public employee unions.

Michigan residents may not be aware of the powerful pressure these unions brought to bear during the past year; those of us in Lansing saw it regularly in loud demonstrations, e-mail campaigns and uncompromising letters to legislators. When the governor announced her budget in February, public-sector union members in T-shirts were already handing out fliers supporting tax increases as an alternative to budget cuts.

There are indications that lawmakers may postpone some of the tax hikes passed a month ago. This is promising only if lawmakers genuinely reduce spending to lighten the burden on the residents they serve -- not just obsess on the possible hardships faced by public servants.

Jack McHugh is senior legislative analyst for the Mackinac Center for Public Policy, a research and educational group headquartered in Midland. E-mail: letters@detnews.com.

[Frank Solle]

The Organization for Economic Cooperation and Development (yes, this group is headquartered in Paris so all you France-bashers can revel in that) just reported that the U.S. has fallen to 15th in average worker income among industrialized nations. Not really good news. At least our CEOs are still raking in 200-400 times what these workers struggle to bring home (and if they fail in their jobs they still get nifty going away packages so they can survive).

Over the last 35 years adjusted gross incomes (you know, that line on your 10-40 that your taxes are based on) has fluctuated up and down like a roller coaster at Six Flags. Yet, at the same time, overall average consumer spending as remained much more constant, although I keep hearing stories of spending going up, up, up, at least at the high end - it must be all those severance deals.

So it would seem to make sense to not tax workers, or their bosses, on what they make, but on what they spend. Eliminate the income tax and institute in its stead a consumption tax. Therefore, you earn it, you keep it. You spend it, you add to the tax base.

This idea, known as a â??Fair Taxâ?? also calls for the elimination of all business taxes, after all, who pays them? Businesses? Excuse me while my laughter subsides. As former Fed Chairman Alan Greenspan said, â??people pay taxes.â?￾ (donâ??t we know).

And if business taxes were eliminated, product costs would, due to market pressure, decrease.

In a recent email message Rep. Elsenheimer wrote:

"I truly believe the first state to effectively enact a fair tax will be able to attract new business and become the envy of others."

And while the Michigan Fair Tax Association (www.mifairtax.org) calls for a 9.5% sales tax on everything, food and medicine included, (this would be applied to all new purchases, not used purchases - if you can afford that new Hummer, you can pay the tax, if you buy a used pickup, you skip the tax) it also calls for a â??prebateâ?? based on income and family size, up to the poverty level so that no Michigan citizen will pay taxes on the necessities of life. This prebate then effectively reduces the sales tax level accordingly, while those who can most afford it pay for it. Sounds progressive, doesnâ??t it?

Of course, the version of the Fair Tax introduced into the Michigan House (House Joint Resolution L) in May of this year by a large group of republican house members, seems to conveniently omit the prebate idea, once again keeping a too-heavy burden on those who can least afford it. Thatâ??s why itâ??s time to make this progressive idea truly progressive.

Would it work? How the hell do I know? Is the current system working? Apparently not so well. Why not try something different? Easy? No. Possible? Why not?

Yet this only deals with money coming in, not going out, which seems to be where Michigan is having trouble. State wages and benefits are too high. State spending seems to be, if anything, inefficient. If the stateâ??s Community Health program has a $12 billion budget (according to Richieâ??s last post), why is it there isnâ??t $100,000 a year for the BIRHC? Why not $75K? Why not something?

There simply has to be more accountability, which is difficult at best in such an unwieldy bureaucracy. Iâ??m a firm believer in social programs. Iâ??m a believer in supporting arts. We must have quality education from pre- through graduate school. But we must, at the same time, have fiscal responsibility, something that we have all seen as lacking in the recent congressional bumblings.

One way to achieve this is to stay in touch with your government, it is after all, yours. Let them know you are paying attention.

Another way is to account for how much you â??giveâ?? in taxes by replacing an unfair income tax with a consumption tax. Itâ??s something to think about.

[woodchopper57]

I want to thank my brother Rich et al for assuming so much about state employees, etc. I've been a state employee for 28 years now and have proudly done my job. It is so easy to assume we are responsible for all the terrible things that have happened to the State of Michigan, but no one really has no idea what we do.

I was on the same plane on as representative Jason Allen when he came to the Island recently, he introduced himself to me and asked me who I was and what I did, and he stated that my department was doing a terrific job, I have no idea if it was a sincere compliment or political rhetoric, but being the naive person that I am, I took it as a compliment

I also have co-workers who are "conversative" in their thinking and complain about the way the State spends money, taxes etc, but they don't mind being a State employee either, can't have it both ways.

Here is a example of what some state employees do:
http://www.lsj.com/apps/pbcs.dll/articl ... 005/news04