This Free Press editorial seems to be giving the FairTax an unacceptable rating, and they don’t even name it so people can check it out. We should see if they will print the name and URL if we send them some letters in reply.
Ken Van Dellen
ADD Michigan 13th & 14th
Michigan As Magnet
July 3, 2005
Gov. Jennifer Granholm and state legislators have hurled plenty of economic development plans against the wall to see what sticks. There are enough good ideas among them to piece together a solid program -- if everyone can put politics aside and Michigan first.
Decisive action is essential after all this talk about the Single Business Tax and creating a new pool of support money for high-tech and jobs-of-tomorrow ventures. What business would come to Michigan or expand here without knowing what the tax structure will look like in six months? How can a startup firm be lured when it might get a better deal by waiting? The state's leaders have to get off the dime -- and onto the dollars.
Here are the major ideas:
· Business taxes: Everyone seems to have a personal version for a revised Single Business Tax, including an unacceptable plan to just phase it out. The better ideas cut the rate, eliminate loopholes and, perhaps most important, ease the burden on companies that operate with a lot of heavy equipment. This is crucial for manufacturers. But over the years, items such as a credit for the personal property tax should be phased in for all businesses.
· Spurring business growth: Granholm initially proposed $2 billion in state spending to attact and retain businesses. Lawmakers appear comfortable only with $1 billion. At least one proposal, which would offer loan guarantees as well as R&D support and a venture-capital fund, could conceivably have a $2-billion impact by attracting more private investment. The more the state can leverage this way, the better. But there may also be a danger in thinking too small. Against national competition, size does matter. The state needs a plan that draws real attention to Michigan .
· Paying for it all: Revisions in the SBT must be revenue-neutral, that is, they must continue to raise the roughly one-quarter of the state's general budget that the tax does now. This is not an unfair level of support to ask of business.
Raising money to attract new businesses can be accomplished by a bond sale or by converting the state's expected proceeds from its tobacco settlement into a lump sum via a process known as securitization. Bonds have the advantage of costing the state less over the long term, but cashing in on the tobacco obligation could be done immediately, without the cost and complications of a special statewide election in November to seek voter approval.
The tobacco plan is an attractive option unless the dollar difference between the two is huge. To raise $1 billion, the state would commit about a quarter of its annual tobacco payment, which now covers the Merit award program and helps shore up Medicaid. As with any borrowing program, the state will basically be betting that future budget growth can cover the costs while maintaining satisfactory services.
That is not a sure bet in Michigan these days. Using the tobacco money for operating expenses like Medicaid is already an admission that the state can't make ends meet. It would be foolish to commit even more tobacco money, as one plan suggests, to fund the Merit program in advance and set up a Medicaid rainy day fund. Future lawmakers and governors need flexibility to change priorities each year, as the economy dictates. Michigan has to remain prepared for the worst, even as it works toward, and invests in, a brighter future.
Copyright © 2005 Detroit Free Press Inc.