Public investment is vital to Michigan. Low taxes don’t boost incomes.

Lou Glazer is president and co-founder of Michigan Future, Inc., a nonpartisan, non-profit organization focused on creating new ideas regarding how Michigan can succeed as a world-class community in a knowledge-driven economy. Its work is funded by Michigan foundations. You can read his latest report and other material at www.michiganfuture.org.

EDITOR’S NOTE:  This is the last of three columns by Glazer on the policy changes he believes the state needs to pursue to nurture a thriving economy.

Many of the recommendations laid out in Michigan Future’s state policy report, “A Path to Good-Paying Careers for all Michiganders,” involve increasing public investments. That raises the question, “how do you pay for them?”

We have long believed that the states and regions with the most prosperous economies –– the broadest middle class –– will be those who make public investments in the assets needed to prepare, retain and attract talent. Ultimately it is talent concentrations, not low taxes, that matter most to economic prosperity. It is increasingly clear to us that public investments are part of what is needed to broadly share prosperity.

So yes, to implement our recommendations will almost certainly require state taxes/revenue to be higher than it is today. That is how you pay for the public investments that matter most to obtaining a higher standard of living for all Michiganders.

That said raising taxes is not the goal. It is a means to making the kind of public investments we think are essential to the goal of good-paying careers for all Michiganders. Getting to the goal is what is important. We are open to any and all ideas on how achieve the goal.

What about low taxes as a path to prosperity? Minnesota has the Great Lakes best economic outcomes and the highest taxes in the Great Lakes. Minnesota ranks 46th in the latest Tax Foundation state business tax climate index. Michigan ranks 12th. High taxes have not prevented Minnesota from having the economic outcomes all Michiganders want: third in the proportion of adults who work, 14th in per capita income and eighth in employment earnings per capita. Michigan on those measures ranks 40th, 32nd and 36th. One can make a strong case that the increased public investments those higher taxes enabled is a major reason for Minnesota being the most prosperous Great Lakes state.

Michigan’s experience over the last 20 years provides ample evidence that cutting taxes is not a way to increase state prosperity. In 1993, per capita Michigan taxes (state and local combined) per capita were 3 percent above the national average, and the state’s per capita income was 3 percent below the national average. In 2004, the state’s per capita taxes had fallen below the national average by 3 percent, but we had fallen even farther behind the nation in per capita income, trailing the nation by 6 percent. And in 2013 (the last year for which tax data is available) the state was 12 percent below the national average in taxes per capita and 12 percent below the national average in per capita income. (The tax data comes from a 2013 Tax Revenue Comparisons: Michigan and the U.S. Average report by the Citizens Research Council.)

By adopting policies that transforms education from birth through retirement and investing in it the state can best help all Michiganders have the skills necessary to have good-paying, forty-year careers. By creating regions across the state with the quality of place where talent from across the planet wants to live and work the state can attract high-wage employers and entrepreneurs that start high-wage businesses. And by establishing and investing in policies that help those not in high-wage jobs work more and earn more we can share prosperity widely. This is the recipe for a 21st century Michigan where each of us can pay the bills, save for our retirement and the kids’ education and pass on a better opportunity to the next generation.

Bridge welcomes guest columns from a diverse range of people on issues relating to Michigan and its future. The views and assertions of these writers do not necessarily reflect those of Bridge or The Center for Michigan.

About The Author

Lou Glazer

A guest author for Bridge Magazine.

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***
Thu, 09/07/2017 - 8:44am

On the other hand you have a state like Kansas that went all in with the tax cutting ideology and the results have been a disaster.

Kevin Grand
Thu, 09/07/2017 - 11:00am

The problem with Kansas which everyone likes to overlook is that they never adjusted their spending during that time-frame and pretty much kept it constant.

What they did in Detroit is a good example locally of what happens when you spend far more than you take in.

The same thing can also be seen on a national scale as well.

http://money.cnn.com/2017/07/26/news/economy/venezuela-economic-crisis/i...

Those are but two examples of what happens when you "make investments" to justify higher spending.

Passing feel-good budgets in order to buy off voters with other people's money has never been sustainable.

Rick
Sat, 09/09/2017 - 9:44am

Thank for the comic interlude. The usual suspects are trotted out: California, Illinois and, of course, Venezuela. Trump is trying to make us like Venezuela by fixing elections, wrecking the economy and doing all the wrong moves with North Korea. Trump would like to be Putin and has said as much. No need for democracy and all we have to do is give the rich more tax cuts and make income inequality permanent (and the law).

Kevin Grand
Mon, 09/11/2017 - 10:40am

Interesting reply, Rick.

Now would would mind telling everyone exactly how what was done in California & Illinois any different from the path Mr. Glazer's organization has proposed?

And I'd be curious (and I'm relatively certain a few other Bridge Readers as well) would like to hear how Citizen Trump (he didn't get elected until '16 & didn't have any real authority until he actually sworn in until January '17), somehow initiated this "election fixing in Venezuela", when the last dictator died in very early '13?

http://www.telegraph.co.uk/news/worldnews/southamerica/venezuela/1138543...

Do you want me to remind you who was actually president at that time?

Paul Jordan
Thu, 09/07/2017 - 3:31pm

States that cut support to public education (or shift financial burdens from the state to traditional public schools) in order to cut taxes are hoping that well-educated young people from out of state will move to them to bolster their work force. Other states that offer much better support to teachers and traditional public school districts are demonstrating far better academic outcomes than Michigan does.

Having done a great job to erode public K-12 education over the past 30 years, the anti-tax conservatives have set their sights on destroying public higher education in Michigan. I have no doubt that, given the strangle hold that they have on Michigan government (thanks to gerrymandering), they can succeed.

Investments in public infrastructure (including public education) are an investment in each other, and our futures.

Michigan Observer
Thu, 09/07/2017 - 9:58pm

Mr. Glazer wildly and totally misapprehends the nature of Minnesota's success. That is partly because he wants to assume that their success was achieved by government policy. It was not. I direct his attention to "Debunking Utopia - Exposing the Myth of Nordic Socialism" by Nima Sanandaji. I realize that in this day and age when all differences in success are attributed to "institutional racism", it is not fashionable to look to differences in culture as an explanation, but such is the case with Minnesota.

Minnesota is, of course, largely of Scandinavian heritage , and so it pays to look to Scandinavian culture as an explanation for Minnesota's success. Scandinavia was for centuries a hard scrabble, difficult place to make a living., and the people developed an ethic of unremitting hard work. Mr. Glazer points out that Minnesota is "third in the proportion of adults who work, " Precisely. Minnesota's Employment ratio is significantly higher than Michigan's. (Actually, people of Scandinavian descent do better in low tax United States than do people in Scandinavia.)

Mr. Glazer says, "What about low taxes as a path to prosperity? Minnesota has the Great Lakes best economic outcomes and the highest taxes in the Great Lakes." Scandinavia similarly has very high taxes and is a notably prosperous region. But there is far more to the story. Scandinavia had very low taxes and small governments for many decades; that was when they had their high rates of economic growth; that was when they became rich and could afford their generous social programs. Their public investments did not precede their prosperity, but followed it. There was a recent period when their high taxes caused the region to substantially under perform the rest of the OECD.

Mr. Glazer contends "Michigan’s experience over the last 20 years provides ample evidence that cutting taxes is not a way to increase state prosperity. " But all things were not equal; he fails to mention the considerable loss of market share by the big three.

And it seems to me that "By creating regions across the state with the quality of place where talent from across the planet wants to live and work the state can attract high-wage employers and entrepreneurs that start high-wage businesses. " is a pretty weak reed to rely on for our prosperity. As he says, "Ultimately it is talent concentrations, not low taxes, that matter most to economic prosperity. " Talent is attracted by talent, not pretty parks. We cannot retain almost half of our college graduates. How are we to attract talent from around the world?

He says "By adopting policies that transforms education from birth through retirement and investing in it the state can best help all Michiganders have the skills necessary to have good-paying, forty-year careers. " Just what are those transformative policies? This nation has invested considerable resources in upgrading our education system, but with limited results.

His report calls for increased funding for higher education with the goal of increasing our percentage of college graduates. How? Why would they stay if there are no jobs for them here? Are they to tend bar while they wait on the jobs? Really?

Cultures change and grow organically. They are not particularly susceptible to government management. Michigan's cultural heritage is markedly different than Minnesota's. A lot of us (myself included) come from Appalachia, a notably poor region. And I have very limited confidence in the ability of people like Mr. Glazer to prescribe policies that will transform us into a new Minnesota.

Mary Fox
Sat, 09/09/2017 - 10:52am

Research has shown over and over that subsidies and tax cuts THAT DO NOT PUT REQUIREMENTS ON EMPLOYERS AND BUSINESSES do little to nothing to bolster middle class jobs. While businesses get to bolster their profits, very little trickles down. Sacrificzing our education, infrastructure and public health systems or shifting them to the lower quality and higher cost of privatizing them does nothing to increase the wealth and the prosperity of the middle class or expand it. We'd be better of restoring tax cuts to seniors, fixing our highways (imagine hiring a work force to do it!) and subsizing our college students. Additionally working to make our water systems functional and investing in true mass transit, might attract businesses like Amazon who took Detroit off its list because of the crappy highways and lack of public transit. Stop giving 9.6 billion away to busisness owners without requiring they produce a set number of middle class jobs. We're paying their workers but we arenot reaping anything for our purchases. Heck the latest Republican scheme gives even the taxes these workers pay to the company, not to the benefit of their own communities. We are becoming fiefdoms.

Larry Stephens
Sat, 09/09/2017 - 10:52am

Look at it this way . . . what you call investment in government programs - I call "buying" jobs with tax money. If those jobs are private sector jobs, all of the taxes paid remain in the public coffers. If those jobs are bought with tax money, only a small portion is returned to the public coffers. The rest is a drain on the public resources. All of that works fine when the public sector payroll is small enough to be supported by the income from private sector tax money.
The difficulty comes in hard times. The private sector jobs dwindle, tax income dwindles, and the public sector jobs are the last to go. The public sector always shrinks at a much slower rate than the private sector, creating an unbalanced formula. It doesn't help when the public sector complains about paying another 10% for health insurance or accepting more responsibility for funding their retirement accounts when folks in the private sector are losing their jobs as businesses struggle to survive or disappear altogether.
I know - because I am the owner of a surviving small business; but one that is a skeleton of what it was 15 years ago.

John Saari
Sun, 09/10/2017 - 7:30am

Simplify/minimize the Federal Gov by passing down to the State and Local Community, everything possible. Simplify the tax. Income tax no loopholes plus a value added tax. Only robot accountants needed to monitor. Eliminate IRS. Eliminate the post office.

duane
Sun, 09/10/2017 - 3:13pm

Mr. Glazer seems to think that all that happens in our economy is based on a decision by government. What he fails to acknowledge, to accept, to understand is that the decisions he wants to happen have no value as long as he and others ignore the role and responsibilities the people that are needed to do the jobs in a growing economy.

The failing in Mr. Glazer and even those in government making these economy changing decisions is their inability to grasp the need to get people to learn. Simply putting people into classrooms does not make them learn [see our public schools], and people must learn the necessary knowledge and skills for the new jobs Mr. Glazer believes his ideas will create.

No where in Mr. Glazer's approach is there any description of why and how all the needed people will gain the necessary knowledge and skills to deliver in the future jobs.

Until we learn how to get people learning to learn and apply that skill for current jobs all the grand plans Mr. Glaser makes and those in government make will be nothing but dreams on a piece of paper.

I would like to read a 4th article in this series where Mr. Glaser proves me wrong and he describes how he has met with those he sees filling the jobs he claims will be create using his ideas and how and why those people will be making the personal investment to learn what is needed for to day and in the future.