Gov. Granholm’s Tax Hike Proposal Would Kill 30,000 Michigan Jobs in First Year, According to Tax Analysis Model
Losses eventually moderate to 13,500 if tax cuts phased in
For Immediate Release
Tuesday, June 15, 2010
Contact: Michael LaFaive
Fiscal Policy Director
Senior Director of Communications
MIDLAND — Gov. Jennifer Granholm's tax hike proposal would cost as many as 30,000 Michigan jobs in the first year, according to research conducted by analysts at the Mackinac Center for Public Policy and the Beacon Hill Institute in Boston. The model, developed to measure the impact of tax increases or decreases in Michigan, showed that the tax proposal would also produce a $264 million drop in total investment in the state in the first year.
"The model told us what should be obvious to even casual observers: raising taxes destroys jobs and wealth, while cutting taxes creates jobs and wealth," said Michael LaFaive, director of the Morey Fiscal Policy Initiative at the Mackinac Center. "While Gov. Granholm and legislators seem to understand that tax cuts produce growth, they cannot bring themselves to apply relief to everyone equally."
Using data from Gov. Granholm's proposal, the State Tax Analysis Modeling Program — better known as STAMP — projected that the nearly 30,000 jobs would be destroyed through fiscal 2011, and then moderate to 13,500 lost jobs through 2014, assuming that proposed tax cuts take effect.
"The state's insatiable appetite for revenue is driving job losses in Michigan," LaFaive added. "How much more can beleaguered taxpayers and workers take?"
The Granholm plan would lower the sales tax rate to 5.5 percent and expand it to services, raising $554 million in the first year. In 2012 and 2013, tax cuts would purportedly be phased in to make the hike revenue neutral. The total new net tax hike would eclipse $940 million.
"The governor's latest proposition will add to our tax burden, accelerate Michigan's trajectory toward greater private-sector unemployment, increase Michigan's overall poverty relative to the nation, and, most significantly, fail to address our real problem: state government's out-of-control spending compared with the imploding private-sector tax base," said David Littmann, Mackinac Center senior economist.
"The real tax burden on any economy is government spending," Littmann added. "This has not been addressed. The proposal at hand will increase incentives to maintain growth in government relative to the size of Michigan's private sector — an entirely unacceptable and predictable economic outcome."
For more information on the impact of Gov. Granholm's tax hike proposal, see Michael LaFaive's new essay, "Tax Hikes Kill Jobs, Tax Cuts Create Them."