Very Unintended Consequences of Michigan’s Tax Hikes
Ed Achorn points out today that the tax hikes on income and gross business receipts passed by Michigan’s Governor and legislature have backfired in a couple of ways.
In a state already battered by the decline of the auto industry, the tax hike left Michigan with an unemployment rate of 6.9 percent, high above the national average of 5 percent. (Rhode Island’s rate is 6.1 percent.) Meanwhile, large numbers of those who can afford to flee are leaving, and the state’s housing prices are declining at the fourth-fastest rate in America. Locals call it “the Detroitification of Michigan.”
Furious taxpayers have gathered enough petition signatures to force a recall election on House Speaker Andy Dillon, one of the chief advocates of the tax hike.
That does not seem a very promising model for Rhode Island to copy.
Achorn correctly points out the step – the first of many needed – that RI House Speaker William Murphy had orchestrated away from Michigan’s model and the absurd reaction that it evoked.
He pushed through a reform that would bring Rhode Island’s income taxes on a slow glide path toward parity with the Bay State’s. He won national attention with the move, which helped advertise the Ocean State as trying to get its house in order.
This — an attempt to gradually become competitive with Massachusetts, never mind the country or the world — is what the public-employee unions are denouncing as an outrageous giveaway to the rich.
It would be comforting to subscribe to the childlike faith that taxing “the rich” would take care of everything. But, in the real world — as Michigan and Rhode Island have amply demonstrated — it does not work. People will invest their money in other states. They have access to these things called moving vans. They can pack up and leave.