Politics & Policy

‘Hail to Those Big Tax-Hikers!’

Michigan Democrats' 100-hour siege to raise taxes.

I visited Michigan on Friday to watch the state legislature vote on taxes. I’m glad I left when I did, because as of last night, they were still at it — they’d been voting on the same proposal for more than 100 hours, and now they’ve only taken a temporary break.

Democrats, who hold a 58-52 majority in the state House of Representatives, are hell-bent on raising taxes by $1.2 billion in order to cover a projected $1.7 billion budget deficit for the next fiscal year. If they succeed, the measure will become law. But House Democratic leaders cannot convince enough of their own members to support their own tax hike. They know there are consequences to such a vote, and they want Republicans to bail them out politically by supporting their tax hike.

That’s why the state House had an open vote continuously from Friday afternoon to Tuesday night on a package that raises the state income tax from 3.9 percent to 4.6 percent. Each night at midnight, the legislative session would end, and at 12:01 A.M. a new session would begin. Lawmakers had to bring their cots and air mattresses to the office

A handful of Democrats are still resisting their leaders, refusing to cast a vote and preventing a majority for the tax increase. So far, House Republicans have been unanimous in covering the taxpayer’s back. As Democrats walk to the brink of an Oct. 1 deadline for a government shutdown, House Republicans are demanding spending cuts and budget reforms before the state squeezes another dime from Michigan’s ailing economy.

State Party Chairman Saul Anuzis has played an unusually active role in urging them to hold out, keeping up the pressure with frequent e-mails to the party’s grassroots. His meddling has earned him the wrath of some legislators in his own party, upset that constituents are paying so much attention to the vote. “Is Saul Anuzis breaking some new ground here? It seems he is setting the new low standard,” moderate Rep. Lorence Wenke told the Detroit News last week. Another anonymous lawmaker complained in the same article: “It’s inappropriate and a growing number of us are sick and tired of it.”

But Anuzis says that Michigan taxpayers are the ones who with a right to be sick and tired as their state suffers through a drawn-out economic crisis.

“If the governor wants to raise taxes in Michigan, all she has to do is convince all of the House Democrats to vote with her,” said Anuzis. “If the Democrats are going to get a tax hike, they’ll be doing it alone.”

Michigan has now lost net jobs two years in a row. Its unemployment rate is a staggering 7.2 percent, the highest in the nation (only Mississippi comes close with 6.7 percent). Between June and July, the state lost 20,000 jobs. It has lost 70,000 since July of last year. Michigan also ranks third in home foreclosures, with almost 14,000 new filings in July.

Between state and local property taxes, sales taxes, income taxes, and business taxes, the state of Michigan siphons off 11.2 percent of its state’s economy — above the national average, according to the Tax Foundation. With few jobs and high taxes, it’s hardly surprising that Michigan’s population declined last year — not just in proportion to the other states, but an actual decrease of 5,000. Meanwhile, the state has been buying nationwide ads daily on CNBC, in which actor Jeff Daniels urges entrepreneurs to move their businesses to Michigan. Another version of the same ad runs on local stations, urging business owners to stay in Michigan.

In this context, a large tax increase hardly seems practical. But Democrats and some Republican senators have implied that any serious budget cuts would result in state prisoners being released and state troopers taken off the streets. One of them is state Sen. Valde Garcia (R., Howell), who was keeping an eye on proceedings in the House on Friday afternoon. “In principle, I agree with Saul, we should live within our means,” he said. “But when you run a business, you try to cut costs as much as you can. Eventually, you have to raise prices.” Garcia said that the Senate, with its two-vote Republican majority, was sure to pass it if the Democratic House manages to do so.

But the Mackinac Center, a free-market think tank in Midland, Mich., has offered suggestions for $1.9 billion in savings that could obviate the need for a crushing tax hike. It would be misleading to imply that Republicans had been responsible about spending when they held both houses of the legislature prior to 2006, but their problem was usually that they cooperated too much with Gov. Jennifer Granholm (D). Her 21st Century Jobs Fund borrowed and spent $367 million in just over one year (an election year, of course). The program has not stopped Michigan from losing jobs, but its termination could save the state $75 million.

The Mackinac Center identifies several other sacred cows that can be eliminated from the budget with hardly anyone noticing a difference. “History and Arts” subsidies can be eliminated, public transit funds can be cut, and the state’s “prevailing wage” law can be repealed for combined savings of nearly $300 million. A change to the state university funding formula and a cut in payments to wealthy school districts could save another $96 million. The state could save $614 million more by using private prisons for a small percentage of its inmates and requiring reasonable co-pays for state employee health insurance policies.

And that’s just the beginning.

So far, Democrats have only offered to make small cuts in future spending increases, but their first resort for dealing with the budget shortfall is a tax increase. They began their marathon vote with hopes that as many as 12 Republicans would support their plan if “bribed” sufficiently with promised expenditures in their home districts. But thanks to grassroots pressure, all of them — including Wenke — were sticking together as of Tuesday evening.

At times, good governance and good politics intersect. Republicans across the country have suffered badly at the polls for failing to protect taxpayers and live up their name for fiscal conservatism. It would be a shame to see them back down in Michigan, letting Democrats off the hook for a tax-hike that will prolong the state’s economic misery and hasten its depopulation.

— David Freddoso is an NRO staff reporter.

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