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Wednesday, May 28, 2008

Where's The Revenue?

The Wall Street Journal has a great piece up on how well raising taxes raises revenues. Governor Jennifer Granholm's package of income and gross receipts tax hikes, and new real estate transaction fees were supposed to fill the coffers for the state, raising $1.3 billion. Instead, it's going into the next budget cycle with a $350-550 million hole in the budget.

As is always demonstrated, and contrary to those who sell tax hikes, the folks who pay those taxes don't keep their behavior the same as the taxes go up. More companies are leaving Michigan, more residents are leaving that arriving, by a 2:1 margin, and consequently less revenue is being generated.

Home prices in Michigan, according to the article, are falling the fourth fastest in the country, and Granholm blames that crisis for her budget issue. Here's the problem, when prices rose Michigan wasn't in the top 4, or even top 10. Arizon, Nevada, California and Florida; the speculator heavens; were the top four in home price increases. They make up four of the top 5 in declines, with Michigan tossed in.

At some point Michigan might have to look south to Indiana, or worse, Ohio, and figure out how they are growing, when Michigan isn't. The common thread, both lowered taxes, and removed regulatory hurdles for businesses that wanted to move in. Both have much lower unemployment than Michigan, and net gains in residence. No doubt many of them moving from the Wolverine State.

Who's moving to Michigan? Retirees. Yeah, it's cold, but guess what, pensions aren't taxed there, and property taxes can get capped for older residents. Wow, low taxes attract people to move to the state. Maybe the governor should look at that during the budget battle that is looming.

Hopefully, the GOP on both state and national levels will remind voters of just how well such tax increases have worked.

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