Guest column: State's broken tax system favors corporations over families

By Gilda Z. Jacobs/Michigan League for Public Policy 

As we enter the budget-setting season in Lansing, we need to step back and ask ourselves some important questions.

Does our revenue structure keep up with the times? Does it improve our education levels and at least keep our quality of life from eroding? Does it ‘pay it forward’ by offering the next generation the educational opportunities, protection of natural resources and other advantages that were there for us?

Year after year at the annual Revenue Estimating Conference (scheduled for today), we discover that our revenue is falling short of what’s needed to pay for education, health care, child protection and other existing public structures. This is due not only to a slow economy, but to an outdated revenue system that acts like it’s 1950 by taxing goods but not many services, and missing out on e-trade.

Gilda Z. Jacobs is president and CEO of the Michigan League for Public Policy, formerly the Michigan League for Human services, a nonpartisan, nonprofit research and advocacy organization dedicated to economic opportunity for all. Its latest report, Losing Ground: A Call for Meaningful Tax Reform in Michigan, is available at

Recent corporate tax breaks mean that businesses will contribute less than 2 percent to the General Fund, the state’s main source of funding. But the working poor – who spend long hours in nursing homes, restaurants, child care and other important but low-paid positions -- will get a $262 million tax increase this year. This is because our state Earned Income Tax Credit was slashed by 70 percent to help pay for corporate tax breaks.

These changes worsen Michigan’s undesirable attributes of rising poverty and growing income inequality. In the face of this, how do we attract families to our state, keep families from leaving and bring in new employers?

Modernizing Michigan’s outdated revenue structure will pay off with adequate revenue to pay for a good quality of life -- access to quality education, good roads, safe communities and protection of the Great Lakes and other natural resources.

Adjusted for inflation, our General Fund is down more than 15 percent compared with 1968.

Modernizing would pay huge dividends. We would have healthier babies, a more educated and ready workforce, a better quality of life and long-term economic stability and growth. Aren’t these the goals we all strive to achieve?

The League has outlined an agenda to move Michigan forward, including a reduction of the income tax on low-income workers and families by restoring the state Earned Income Tax Credit, which was cut from 20 percent of the federal credit to 6 percent.

Other recommendations:

* Ensure that business tax changes are at least revenue neutral by increasing the Corporate Income Tax to replace lost revenues with $550 million lost in fiscal year 2012 alone.

* Modernize the sales and use tax by including more services and capturing Internet sales.

* Scrutinize all forms of spending, not just annual appropriations, including tax credits, deductions, deferrals and exclusions that are forms of “silent spending.’’

* Invest in state priorities that are fundamental to job growth and economic development, including education, health, high quality early education and basic income supports.

Let’s face it. Our revenue structure is broken. We must pursue tax reforms that modernize our outdated revenue system. It needs to be more dependable. It needs to be fair. Let’s start asking the right questions and, hopefully, offering the right answers.

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Wed, 01/16/2013 - 12:24pm
Ms. Jacobs seems to have one interest, gather more tax dollars. She seems to have no interest on how the means and methods and the impact of gathering those dollars for she is not talking about looking at what the purpose of government and how taxing impacts the State, community, or even the the taxpayers. She shows no interest in providing value for those dollars to the tax payers. She siimply talks about being sure that the government spending is given more and more dollars from those who have been paying irregradless if taxing methods create competitive barriers to those paying the taxes. Ms. Jacobs shows no interest in working with the tax payers to see what their issues are with the current taxing scheme and working with those tax payer to address the issues to even lower the burden of how those taxes are reported and paid. Ms. Jacobs claims want balance between those who carry the tax burden and yet she shows little concern of how those who pay the taxes earn the money to pay the taxes she so wants the State to spend. I have been a tax payer in Michigan and elsewhere, and it happens that my employer in each setting paid taxes and allowed me to pay me so I could pay taxes. In each setting I gain more benefit from the taxes I paid then my employer gain from the taxes they paid. For if it was the schools, I learn not my employer, if it was police or fire my neighborhood was always at greater risk than my place of employement. In my case if it was regulation my employer provide more help (more information, more training, more understanding of what was being regualted) for the State then it ever recieved from the State. By all appearances from this article it would seem that Ms. Jacob is not concern about the balance between tax payers and taxing, it is simply about taxing business more irregardless of the value they provide to the State, to their communities, to other tax payers. If I were to guess Ms. Jacobs sees the businesses and non-voting payers that she need have little care or consideration for. It is disappointing that she can only see taxpayers as individuals payers or voters and not in the context of the communities they create and support. We have towns that grew around the willingness of business to risk and invest in people and provide them with livelihoods. Ms. Jacobs only sees businesses as a checkbook and she cannot see what those businesses have provided to the people, even those will lower wages. Sometimes there is merit in stepping back and taking a moment to gain a broader view of the community and how each member impacts the community rather then simply looking at how to spend their money for them.
T. W. Donnelly
Wed, 01/16/2013 - 5:13pm
I agree with everything that Ms. Jacobs writes. Our state's priorities are seriously out of whack. The poor are getting robbed. The schools go without. The police and fire services are cut to the bone. Our legislature has spent more time regulating the sex lives of the citizens than it has for creating jobs. What obligations does the community have for its citizens in exchange for taking money in taxes ?