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