James M. Hohman

Michigan Governor Jennifer Granholm presented her executive budget today. In it, she argues that Michigan needs to raise taxes in the over the next few years because its revenues are far below its constitutional revenue limit. She states, "The gap has grown as a result of the economic downturn and is anticipated to widen further as currently enacted tax changes take effect in the next several years." … more

In her State of the State address last week, Michigan Gov. Jennifer Granholm listed the reasons why she believes the state's economy has fallen. "We all know the reasons — trade policies that dismantled factories here and built them in Mexico, the auto industry in meltdown, the banking crisis, the mortgage crisis, and on top of all that, a severe national recession." While the latter reasons may have played their part, company and job relocation to Mexico has been the least of Michigan's problems. Furthermore, trade with Mexico has actually been a bright spot for the state. … more

Michigan's unemployment rate of 14.6 percent was the highest in the country, according to today's release from the U.S. Bureau of Labor Statistics. The next closest state was Nevada, which increased to 13.0 percent. … more

Part of the new Michigan Senate Republicans' spending reform proposal would mandate public school districts to seek competitive bids for food, custodial and transportation services. The Mackinac Center surveys each district annually to see whether they contract out for these services. You can view the 2009 survey results here. … more

Lansing policymakers are discussing plans to shift taxes around and are being supported by some faulty observations. Some of them made their way into an op-ed by Susan Demas in The Detroit News. She noted, "Michiganders have gone from paying 9.5 percent of their incomes in taxes in 1999 to 7 percent today."
Actually, Michiganders pay much more in taxes. These are simply figures from the state's Headlee amendment revenue limit calculations, which do not count local or federal figures, nor all of the state's non-federal revenues. Adding local tax burdens increases the figure to 10.7 percent. Overall, Michigan citizens face a much broader burden of government. The federal government takes in 21.6 percent of the entire country's personal income and Michigan pays its share, leaving Michigan citizens tax burdens around 30 percent instead of 7.
Besides, the state tax system is very good at capturing revenues from growing economies. That's largely the reason why state government coffers were closer to the Headlee cap in the high-growth 90s. But Michigan has not grown in a long time. … more

Yesterday, forecasters from the Michigan House Fiscal Agency, Senate Fiscal Agency and Treasury Department met to agree on an estimate for the next fiscal year's state revenues. These revenues are important because coupled with spending figures, they tell us whether fiscal 2011 will result in a surplus or deficit.
Despite Michigan's poor economy, state government revenue is expected to increase from this year to next. Nevertheless, the state is expected to spend $1.6 billion more than it receives in revenues. … more

Even with an expected budget overspending crisis of $1.8 billion next year, Michigan government's revenue situation is doing much better than the rest of the economy.
State tax receipts are largely determined by how well a state's economy is doing. When workers earn more, they pay more income taxes. When consumers buy more, they pay more in sales taxes.
Because of those ties to the economy, every state's tax base is naturally exposed to cyclical factors. But each state responds differently. Over the past year, Michigan's has been far less responsive to the recession than most states. … more

The idea that agriculture is Michigan's second-largest industry is a piece of conventional wisdom often iterated, in fact, so much that a Google search for "second largest industry" returns Michigan's iterations of the idea. Yet this is false. Agriculture is nowhere near as large as most Michigan industries. … more

New state-by-state unemployment figures were released today which showed that Michigan remains the state with the highest unemployment rate for the 45th consecutive month. But overall, its rate decreased along with 35 other states. … more

The Michigan Economic Growth Authority is the state's premiere economic incentive program and accounts for much of the state's "job creation" announcements.
But most of the job gains and losses in the state are unheralded. Consider this chart of quarterly job gains, losses and MEGA announcements. … more

In a recent Grand Rapids Press column, Lou Glazer argued that there's a correlation between a state getting more college graduates and enjoying higher statewide income levels.
However, Glazer uses only snapshot views of what the per capita personal income or economic output is in a state right now. He ignores trends. But you can't just wear a white suit to become Mark Twain, you have to grow to the role. … more

It's often repeated in the halls of government and the state-focused media that Michigan "underinvests" in higher education. The facts suggest otherwise.
In 2003, Michigan had the seventh highest spending among the states on public universities. Appropriations here have been fairly level since then, but we were still the 10th-biggest higher ed spender in 2008. Even with sideways revenues for half the decade, Michigan has been surpassed only by Ohio, Pennsylvania and Georgia in total dollars devoted to higher education. … more

Rep. Alma Wheeler Smith, D-Salem, proposed imposing a graduated income tax on Michigan individuals, and also extending the sales tax to services. She expects these hikes to extract an additional $6.5 billion from families and businesses here.
Rep. Smith and others seeking tax hikes (on both sides of the aisle) often claim that because of changes in the state's economy Michigan's tax system extracts fewer dollars per unit of economic activity than it did in an earlier era.
They are mistaken. Indeed, in its ability to suck revenue from a given level of (declining) economic activity, Michigan's tax system has outperformed 31 other states over the past year, despite being affixed to the nation's worst economy. This fact contradicts the claims of would-be tax raisers that our system is "broken" and needs to be "modernized." … more

Michigan had the best job creation it has had since the boom 1990s last month. The state added 38,600 jobs in a single month, a gain of 1.0 percent. The last time the state added more than 1 percent in a single month was in August 1998 when GM workers returned to work after a month-long strike.
Here's a look at recent monthly job gains and losses: … more

The state archeologist office, which traces the remains of human civilization and industry, is now found in the Michigan State Housing Development Authority.
Seriously. … more

Michigan politicians are fond of blaming the domestic auto industry's decline for all the state's problems. But "auto industry" just doesn't mean what it used to here. For example, domestic auto sales have fallen by 49.8 percent since their 1999 peak. Over the same period, however, inflation-adjusted state tax and fee revenues have only declined by 15.9 percent. … more

Advocates of higher taxes frequently claim that Michigan's tax system is "out of sync" with the current economy, and needs to be "restructured" in ways that ensure more steady (and larger) extraction of revenues. But when it comes to extracting revenue from a declining tax base, Michigan has been taking a larger proportion of the population's wealth and income, not less. It's also been "outcompeting" other states in this regard. … more

A new report from the Pew Center on the States, Beyond California (pdf), erroneously suggests that Michigan's economic travails are due to the fall of the auto industry and the presence of what it characterizes as an "out of sync" tax system. … more

The appproach Michigan politicians have mainly chosen to show that they're "doing something" about the state's ongoing economic decline is a massive expansion of discriminatory tax breaks and subsidies for particular firms. The failure of such programs has created another political need, which is a way to demonstrate that this approach really isn't a waste of time and money. Enter the annual Governor's Cup ranking by Site Selection magazine, which is considered the "company paper" for government "economic development" bureaucracies around the country. … more

In the latest Michigan Senate Fiscal Agency Economic Indicators report, economist David Zin echoed an observation I made here last month on personal income: The recent increase in a key economic indicator — personal income growth — suggests the very opposite that Michigan has turned a corner. … more

In response to a question from Jon Boguth in Time on what makes Michigan's existing businesses less worthy of tax relief than film producers, Gov. Jennifer Granholm responded, "You can't give tax credits to everybody, because somebody's gotta pay for them." It's a clear admission that the program is not costless. And because the film incentive is so generous, the costs of "success" would be massive. … more

At the state level, government revenues and spending may be falling, but new Census Bureau evidence - considered the "gold standard" in such things, suggests that the overall revenues and spending of all units of government in Michigan have never been higher. … more

Since April 2008, Michigan has given qualified film productions up to 42 cents on the dollar for every expense they incur in the state. While the state is able to point to a number of films and projects given assistance from this program, the state's motion production and sound recording industries employ fewer people now than when the subsidy began.
According to the Bureau of Labor Statistics, Michigan's movie and sound industries employ 5,222 workers as of March 2009, the most recent month available from the quarterly census of employment and wages. This industry declined by 31.2 percent from a peak in 2002 of 7,586. And even at its peak, this industry accounted for only .2 percent of the state's total employment. … more

This chart might be called the "Political Class Desperation Index." The need for transformational reform of Michigan's tax, spending, labor and regulatory environments is indicated by the skyrocketing unemployment rate. The failure of the political class to buck special interests — including government employee unions — and finally undertake those reforms makes its members increasingly desperate to create the appearance of "doing something." Thus the massive increase in futile picking of winners (and losers) for receipt of discriminatory tax breaks and subsidies. These create diversionary "feel good" stories for local newpapers, but do nothing to reverse the state's economic decline — and may even accelerate it. ("MEGA" is the flagship program of Michigan's bureaucratic "economic development" empire.) … more

The Michigan Economic Growth Authority, the state's lead business incentive program, is primed for new amendments to raise the cap on the number of credits it can award this year. While there are some good transparency efforts in the bill, the state would be better served by eliminating the program and lowering taxes for every business. … more

The Bureau of Labor Statistics today released the September state-by-state unemployment rates. Michigan remains the highest in the country at 15.3 percent unemployment. This is the 43rd month in a row that Michigan has been the worst state for finding a job.  … more

The Michigan "Legislative Commission on Government Efficiency" has come out with a set of "overarching conclusions" that includes this gem:

Cross-cutting and underlying principles are the foundation of our recommendations
— Look to optimize across all levels and units of government
— Address underlying structural issues
— Be holistic in the approach (look at all aspects of the budget and government operations)
— Create a roadmap to fiscal stability
— Be of sufficient magnitude to make a difference
All clear now? Good — let's get on with it.
Seriously, these are the kind of vague generalities and bureaucratic gobbledygook where you can almost rearrange words in any particular order and they're no less meaningless.
In contrast, here's an example of what serious, concrete, specific recommendations for transformational reform really look like.  … more

The Bureau of Economic Analysis released 2nd quarter personal income growth data. The figures include revenue from all wages, dividends, benefits and transfer payments, and shows which states are growing the most.Michigan grew a remarkable 7th among the states - positive news considering the state's long economic decline. At .7 percent, it wasn't much growth, but the US average was .2 percent. … more

In an appearance on Fox News Sunday, Gov. Jennifer Granholm stated that the stimulus had created or retained 36,000 jobs in Michigan. However, it appears her administration's own count of the figures says that figure is inflated. A running tally on www.michigan.gov/recovery shows that the figure is 19,498. … more

One recipient of government business incentives is angry at the state for publishing an "absurd" value of those incentives, according to the Michigan Information & Research Service. The incident illustrates the need for transparency over the state's economic development efforts. … more

The state's economic development department has stopped releasing important information about the state's flagship incentive program, the Michigan Economic Growth Authority. To help make the program more transparent, the Mackinac Center requested documents about each credit awarded through this program and made them available online. You can view the updated database here. … more

In a profile that appeared in today's Washington Post, Gov. Jennifer Granholm misused data on her targeted business tax break and subsidy programs, the administration's primary response to a Michigan economy that has lost 632,600 payroll jobs since her inauguration back in 2003. The Post writes, "Since taking office in 2003, Granholm has created 163,300 positions, her office says," a reference to jobs directly attributable to business "incentive" programs. In fact, the most recent data indicates that MEGA, the state's flaghip corporate welfare program, can claim credit for just 7,755 new jobs during Gov. Granholm's six year, nine month tenure in office! … more

In a press conference today, Mich. Governor Jennifer Granholm argued that tax hikes are necessary. "What we're fighting for is Michigan not becoming Mississippi," she said. However, the rhetorical flourish is undermined by the reality that Mississippi is no longer the "small government = high-poverty" foil that Michigan's political class has often used to justify keeping their government employee constituencies well fed with more tax dollars.  … more

New data from the U.S. Census Bureau show that state and local government tax burden increased from 2006 to 2007. Michigan workers pay on average $8,691 in property, sales, income and other taxes. This is a one-year increase of 5.9 percent. … more

Poverty rate data released today shows that Michigan fell further in its economic status. The percentage of Michigan residents living in poverty increased from 14 percent to 14.4 percent in 2008, according to the Census Bureau release. … more

Following up on yesterday's report of possible corruption in Detroit Public Schools, The Detroit News reports on the arraignment of Ecorse's mayor and controller, who have been charged with conspiracy, bribery and fraud with regards to the city's public works contractor. The pair allegedly received at least $10,000 and a Lexus from the contractor, according to The News. … more

The Detroit News today writes about a possible scandal regarding building construction and land purchases by Detroit Public Schools. The district paid more than $156.2 million for services it may have obtained for $15 million, according to The News. It underscores the importance of transparency. … more

Michigan median household incomes grew by 1.7 percent, according to a release today by the U.S. Census Bureau. Adjusted for inflation, Michigan incomes fell by 2.4 percent. Overall, the national median household income decreased by 1.3 percent. Unlike much economic news in the past decade, a number of other states are sharing in the downturn. … more

State-by-state figures are not released until Friday, but today the state released August employment and unemployment figures. After decreasing in July, Michigan's unemployment rated inched back to 15.2 percent. … more

Gov. Jennifer Granholm has gone public a laundry list of proposed tax hikes and “loophole closings.” It's a "death by a thousand cuts" strategy, which most items extracting relatively small amounts, or targeted at politically powerless populations like smokers. Unfortunately, these little injuries add up to a lot of blood drained from Michigan's already ailing economy. To put this in perspective, to raise the same amount of revenue raising business tax rates, the current (and reviled) 22 percent surcharge on the Michigan Business Tax would have to be raised from 22 percent to 51 percent. Alternatives, the governor and legislature could jack-up the stat income tax by another 11 percent, increasing the rates from 4.35 percent to 4.85 percent. (estimates on revenue from each tax are available here.) … more

The state has until the end of the month to pass a budget and a key figure, Mich. Speaker of the House Andy Dillon just stated that an agreement is "very close". While a number of the Mackinac Center's reform ideas are being discussed for this budget, the speaker is looking at more. … more