An onerous tax burden, combined with the inevitable inefficiencies that occur when politicians try to pick winners and losers, are causing Michigan's economy to lag compared to other states. A column in the Wall Street Journal notes that the governor wants higher taxes - policies that will accelerate Michigan's decline:
Michigan's private sector is contracting compared to the expanding tax bases of every other state. The economic fog will lift when policies are enacted that make Michigan a good place to do business for newcomers as well as for existing firms. This won't happen if the legislators in Lansing, the state capital -- who advocate heavier tax burdens on the remaining taxpayers to subsidize or attract firms handpicked by government officials -- get their way. These targeted subsidies simply redistribute scarce income. Nor is the governor, Jennifer Granholm, moving in the right direction. Her recent call to impose a 2% tax on most services is a nonstarter. But she's also calling for a new tax on the estates of wealthy residents, giving those with the means an even more urgent reason to leave. Michigan's slide will continue.
If Michigan policy makers want the state to prosper, they should return to the policies that originally helped create wealth. First on the list would be repeal of the personal income tax:
Michigan was a formidable competitor prior to 1967, when the state had no personal income tax. Why not return to these days by abolishing the state's 3.9% personal income tax and replace it with nothing? Even a slow phase-out of the tax will allow the state to vie for business, new jobs and private-sector investment with fast-growing Florida, Texas and the nearly half-dozen other states that do not levy an income tax. If Florida and Texas -- two of the fastest growing states in the union -- can survive without income taxes, Michigan can too.