In a guest commentary published in today’s Detroit Freep Press, Michigan Speaker of the House Jase Bolger (R-Marshall) seeks to bolster support for Governor Snyder’s budget proposal.
Among many controversial aspects to it, Snyder’s 86% reduction to corporate income taxes is near the top of the list. Delivering that kind of tax relief at a time when the state is already gasping for tax revenues initiates a cascading effect required to offset it, including massive cuts to education, extending income taxes to pensions and eliminating the earned income tax credit for low income families.
Bolger writes:
Michigan is ranked as the 48th worst state in corporate tax competitiveness and currently ranks as the 46th worst state for unemployment.
Bolger, although not offering a source for the ranking, appears to be referencing the Tax Foundation’s rankings, which is worth noting. The Tax Foundation report supports that 48th ranking for Michigan’s corporate income tax, but that represents only one element of their overall Business Tax Climate Index which also comprehends Tax Incentives, Individual Income Tax, Unemployment Tax, Sales Tax and Property Tax.
So while the Corporate Income Tax ranking must certainly represent a burden to our Tax Foundation rankings, Michigan must be making it up in most of the other areas because our state’s overall Business Tax Climate Index ranking is 17th best in the country. In their analysis of the Snyder proposal, they project if enacted Michigan’s corporate income tax rankings would improve dramatically – from 48th to 22nd. Our overall Business Tax Climate Index ranking would go from 17th to 13th. (It’s unclear to me in this analysis comprehends the state’s recent move to reduce the term of unemployment benefits.)
Policies make choices and as a result, some options are preferred over others. It’s absolutely appropriate to analyze the line items, such as the corporate income tax ranking. But analysis requires a view of the big picture as well. It may well be the right choice for the state to improve our corporate income tax rates, but I do think it’s worth noting where that sits in the overall context of the business tax climate.