It's about how resources are managed
It is a common trope in Michigan and elsewhere that the path to state prosperity is to have high taxes and quality services, with Minnesota pointed to as the paragon. Yet high taxes do not guarantee quality services, as Detroit can attest.
Detroit has the highest effective property taxes in the country, according to the Minnesota Center for Fiscal Excellence’s 2014 property tax study. For commercial property at all different values, Detroit is No. 1 in the nation. For homesteaded property, only Bridgeport, Connecticut surpasses Detroit. Detroit also has the highest property taxes for most values of industrial property. Only New York City has higher property taxes on apartments than Detroit. All of these rates are higher than those in Minneapolis. The one saving grace for property taxpayers in Detroit is that the net tax burden has decreased with the collapse in real estate values in the city.
Minnesota does not allow a city income tax, so Minneapolitans are subject to the state’s progressive income tax rates that begin at 5.35 percent and increase to 9.85 percent. Michigan not only has an income tax, but it lets cities adopt their own as well. The highest rates for Detroit are 2.4 percent for residents and 1.2 percent for commuters. That pushes a low-income Detroit resident above the lowest rates in Minneapolis.
Sales in Minneapolis are taxed at 7.7 percent with state, county, city and special levies included. Michigan doesn’t allow local governments to have a local option so purchases in Detroit are at 6 percent.
There are other taxes that these cities enact that may fall on at least some of their residents. Detroit has casino taxes that account for nearly 20 percent of its tax revenue. Minneapolis has a 3 percent liquor and restaurant tax. Detroit has a utility tax while Minneapolis has a utility franchise fee. There are assorted other fees and fines and taxes that will influence how much residents owe their various levels of government.
But a comparison of the two areas doesn’t show Detroit to be a low-tax area. Property taxes are higher and sales taxes are lower. Greater emphasis should be placed on how the resources are managed rather than whether they should increase from already-high rates.
Op-ed published in Lansing State Journal
More does not always mean better, especially when it comes to education funding.
This finding was the subject of a recent op-ed co-authored by Mackinac Center Education Policy Director Ben DeGrow and Edward Hoang, assistant professor of economics at the University of Colorado-Colorado Springs, who co-authored a study examining the relationship between education funding and student performance.
Out of the 28 academic indicators we analyzed, only one (seventh-grade math scores) showed a statistically significant correlation with spending more money. … And for the other 27 indicators, there was no statistically significant correlation between how much schools spent and how well their students performed.
The Mackinac Center’s study comes in advance of a $400,000 state-funded study commissioned to determine if Michigan is spending enough to adequately educate its students. However, DeGrow and Hoang note the group doing the study has recommended spending increases in each of the 13 such studies it has completed.
They even concluded that schools in Washington, D.C., needed more resources, despite its schools already spending a whopping $29,000 per student.
Rather than double down on standard approaches with more dollars, Michigan needs a major education overhaul.
Read the full op-ed in the Lansing State Journal.
Why simple regulations are important to so many Michiganders
Ridesharing companies operate in six cities in Michigan and have provided job opportunities and rides to thousands of Michiganders. But they currently operate in a legal gray area, putting drivers at risk. We recently spoke to a handful of drivers for Uber about their experiences and why it is important to establish statewide regulations to protect the service.
“Uber saves lives,” said Rebecca and Babacar. Both drive in Grand Rapids and discussed how the ease and convenience of ridesharing apps provide an attractive alternative to driving drunk. But Larry, who drives on the other side of the state, recalled a different experience: “I got a ticket in Ann Arbor for operating a limousine without state certification,” he said.
Kevin, a father of four whose extra income from Uber saved his family’s house, had a question for lawmakers: “Are you going to be a state that companies look towards expanding to, or are they going to be a last resort because they know it’s going to take so much money to get in here and do things?”
New Mexico and Nebraska limit forfeiture to criminal cases
The federal government is seizing a historic Detroit recording studio under its forfeiture laws. It appears to be a case where forfeiture may be justified, but provides us with an example to talk about how forfeiture should be used.
The Detroit Free Press sums up the case:
United Sound Systems may be the country’s oldest independent recording studio and has hosted legendary artists such as Miles Davis, George Clinton and The Rolling Stones.
Yet the downtown property on Second Avenue may end up seized by federal prosecutors, who say it was purchased with funding from a known cocaine trafficker. They also claim the studio has been the site of drug deals.
The allegations are part of a forfeiture complaint filed in federal court on April 25, which says that Dwayne Richards, a “known drug trafficker and money launderer” who distributed cocaine through metro Detroit, paid for the studio years before he was convicted of conspiring to distribute more than five kilos of cocaine.
The studio is owned by Danielle Scott, the cousin of a convicted drug trafficker. According to prosecutors, “It appears that Dwayne Richards, a known cocaine trafficker, used Danielle Scott to try to conceal the movement of money and property that are the proceeds of his drug trafficking activities by purchasing the (studio).”
Though this forfeiture case will be pursued under federal laws, it provides a way to think about Michigan’s current forfeiture laws if this case were to be handled under state law, as it should be.
Under Michigan's forfeiture law, state or local law enforcement officials could seize the recording studio while they investigate the alleged crime. State prosecutors could then have the property transferred to the government under current civil forfeiture laws.
Before a court case, Scott would be required to pay a bond of up to $5,000 within 20 days if she wished to challenge the forfeiture. The prosecutors would then have to prove with “clear and convincing” evidence that the property was garnered with illegal drug money. (Before laws passed last year, the standard would have been merely a “preponderance of the evidence”).
This could all happen even if Scott were not convicted of or charged with any crime. Ten states and the District of Columbia require a conviction before the property could be transferred to the government.
But New Mexico and Nebraska have the ideal system. In both states, state legislators eliminated civil forfeiture and only allow criminal forfeiture. That means that when prosecutors convicted Richards of drug crimes in criminal court, they would then have to show in the same court that Scott’s ownership of the property was involved in a money laundering scheme and purchased with profits from illegal drug sales. If the court agreed, then the state could take ownership of the property.
Those states also adopted rules that limit the federal government’s program called “equitable sharing,” which has been problematic. This program enables the federal law enforcement agencies to “share” the proceeds of their forfeiture cases with local and state agencies. Under the model adopted by New Mexico and Nebraska, law enforcement agencies still have sufficient tools to arrest, charge, convict, seize and forfeit property under state law. Michigan policymakers should impose similar restrictions so that law enforcement agencies here do not outsource forfeiture activities to the federal government.
Michigan has been making great strides on the issue of forfeiture. Last year, legislators passed laws requiring a higher standard of evidence and increased transparency. Recently, House and Senate committees passed a bill that would outlaw a bonding requirement for forfeiture. The state is moving in the right direction, but there’s still work to be done, with the best models still being New Mexico and Nebraska.
Joint Free Press op-ed explains transparency efforts
The Mackinac Center and Sierra Club often hold different positions on policy, but have come together to call for a more transparent and accountable government. The Detroit Free Press recently published an op-ed written by David Holtz, chairman of the Sierra Club Michigan Chapter, and Michael Reitz, executive vice president of the Mackinac Center for Public Policy.
In the piece, the authors discuss a package of bills moving through the Michigan Legislature that would make state government more accountable to the people and remove hurdles that have hindered journalists and activists from gaining a complete picture of what created the Flint water crisis. House Bills 5477 and 5478, introduced by Reps. Ed McBroom and Jeremy Moss, respectively, would make the governor subject to the Freedom of Information Act.
A separate set of bills would establish the Legislative Open Records Act, to which Holtz and Reitz offered some recommendations to “improve the review process, clarify the definition of a 'public record,' and eliminate new loopholes.”
First, the current bill draft provides a review process if the Legislature denies a person access to records or if it charges an exorbitant fee. … We believe a robust public records law for the Legislature will give people the ability to take their case before a judge just as the current FOIA law provides for access to records of state agencies.
Second, the LORA language defines the term “public record” in a unique manner: It is “a writing … that has been in the possession of the public body for 15 days or more.” … Public records shouldn’t have a maturation period. Under FOIA, agencies are already permitted to take up to 15 days to provide a public record. The Legislature should adopt a similar approach.
Read the full op-ed in the Detroit Free Press.
Economic Development Week is no cause for celebration
The International Economic Development Council is recognizing its 90th anniversary by promoting what it calls “Economic Development Week,” designed to celebrate its industry and professionals. Yet the act of governments using tax dollars to pick winners and losers is nothing to celebrate. If anything, government development agencies interfere with rather than facilitate economic well-being, particularly when they use targeted tax deals and subsidies.
Governments around the United States — and in much of the world — have established countless agencies and programs under the rubric of economic development and job creation. Decades of experience, along with anecdotal and empirical evidence, demonstrate that such efforts have been an expensive failure, particularly when their opportunity costs are considered.
Michigan’s jobs agency, the Michigan Economic Development Corporation, and agencies like it, should be shut down in its entirety. Likewise, the state should end policies that redistribute money to select businesses in the name of economic development. If either of these events would happen, it would be worthy of a weeklong celebration.
Empirical evidence shows that government economic development programs are rarely as successful as advertised. In a 2004 paper titled, “The Failure of Economic Development Incentives,” two professors of urban planning say that given the size of economic development programs, one might expect to see “undisputed evidence of their success.” Yet, they observe, “This is not they case.” The authors conclude, “In fact, there are very good reasons, theoretical, empirical, and practical — to believe that economic development incentives have little or no impact on firm location and investment decision.”
Here in Michigan, the state ran an expensive business tax incentive program called the Michigan Economic Growth Authority. Four analyses of the program were performed; three found it had no impact on job creation, or worse, had a net negative effect on jobs. Two of those analyses were published by the Mackinac Center in 2005 and 2009. The Anderson Economic Group, in 2010, found more jobs would have been created through across-the-board business tax cuts than through the targeted ones of MEGA. Only one study, from the Upjohn Institute, found a positive impact of the program, but it was small.
The MEGA tax credit scheme was arguably the largest of the MEDC’s programmatic failures, but not the only one. The state wasted about $450 million on a film incentive program that gave subsidies for film production work done here. The Mackinac Center found that there were more motion picture jobs in Michigan before the film incentive took effect than after. The Legislature eliminated film subsidies in 2015.
The Office of the Auditor General examined the state’s 21st Century Jobs Fund and found it had problems meeting expectations: Only 19 percent of the original jobs promised by the program materialized. And this was just a straight accounting, not an empirical analysis designed to capture all the program’s costs as well as its benefits.
The MEDC’s “Pure Michigan” advertising program is another example of a government activity that is better at spending money than generating wealth or incomes. Through Pure Michigan, the state buys advertisements hoping to lure out-of-state tourists to Michigan as a way of helping the economy. The MEDC claims huge returns on investment but the Mackinac Center’s research points to the opposite conclusion.
Despite what employees of government economic development offices say, the programs they operate are largely ineffectual. There are three major reasons why.
First, the government has nothing to give to any business or industry that it does not first take from someone else. The financial incentives that are redistributed to a lucky few to create jobs must be funded by taxation that forcibly takes dollars from other people, who lose money they might have otherwise used to create jobs.
Second, there are direct and indirect financial costs of redistributing taxpayer dollars. The MEDC bureaucrats who run these programs do not work for free. Steve Arwood, the MEDC’s chief, makes $267,000 a year in salary, plus benefits. And of course, there are hundreds of others more working for the state’s corporate welfare bureaucracy.
On a related note, when businesses try to curry favor with the MEDC and similar institutions, their activities harm the state because they are economically inefficient. Harold Brumm’s study published in the Cato Journal found that states that encourage this behavior have slower rates of real economic growth.
Third, Lansing’s political appointees are not blessed with a divine ability that lets them separate investment winners from losers and then invest our money in the winners. The idea that they can rearrange our economy in a way that improves on market forces on net balance over time is the fatal arrogance of economic development planners in government.
Those who work in government economic development agencies may mean well, but that is of no consequence to results. If anything, they are likely to encourage costly interference in what may otherwise be a more efficient and healthy economy.
Transit subsidy taxes, ban bag bans, alien drivers, grass seed warning font size
Senate Bill 739, Authorize 2-mill DARTA property tax and limit: Passed 32 to 5 in the Senate
To specify that the property tax that the Detroit Regional Transit Authority may collect under a 2012 law may be for up to 2 mills but not more, which at that rate would reportedly extract an additional $300 million annually from Macomb, Oakland, Washtenaw, and Wayne County property owners. Also, to exempt this tax from being skimmed by a “tax capture” authority’s tax increment finance scheme (for example a downtown development authority).
Senate Bill 739, Warren amendment to allow higher DARTA property tax: Failed 10 to 27 in the Senate
To allow up to 4 mills in property tax to be imposed on metro area property owners by this entity, rather than the two mills proposed by Senate Bill 739.
Senate Bill 853, Preempt local grocery bag bans: Passed 25 to 12 in the Senate
To preempt local governments from imposing regulations and restrictions on plastic grocery bags or other "auxiliary containers," defined as a disposable or reusable bag, cup, bottle or other packaging. At least two counties are reportedly considering bag bans.
Senate Bill 738, Require more state pensions disclose amount of underfunding: Passed 108 to 0 in the House
To require that state pension systems include an executive summary of the system’s unfunded liabilities in annual reports they are already required to produce. This would apply to the separate systems for judges, State Police, state employees and school employees.
House Bill 5512, Extend sunset on welfare heating subsidies: Passed 108 to 0 in the House
To extend for another three years the 2016 sunset on a state home heating welfare subsidy program.
House Bill 5447, Cap the number of fund-raising specialty license plates: Passed 90 to 18 in the House
To cap the number of specialty fund raising license plates at 10 and revise details of this program including the amount an interest must pay to get this privilege, and how many of their plates must sell each year to keep it.
House Bill 5442, Authorize Amber Alert type system for active shooter: Passed 106 to 2 in the House
To require the State Police to establish procedures for rapidly disseminating useful information to radio and television stations, and text messages to cell phones, regarding a "clear, present, persistent, ongoing, and random threat to public safety."
Senate Bill 637, Expand grass seed seller regulations: Passed 99 to 9 in the House
To revise details of a law that imposes a testing and labeling mandate on grass seed sellers. The bill would require cool season lawn and turf seed and mixtures to include a sell by date, and ban selling them if a state-mandated germination test was more than 15 months earlier. The bill would also require a larger font size be used on a required warning label.
Senate Bill 501, Require alien drivers have visa or passport while driving: Passed 90 to 18 in the House
To require resident aliens who drive a vehicle in Michigan to have both a valid drivers license issued by their native land and a passport or valid visa. Current law only requires a valid driver's license. (A legal alien can also get a Michigan driver's license.)
SOURCE: MichiganVotes.org, a free, non-partisan website created by the Mackinac Center for Public Policy, providing concise, non-partisan, plain-English descriptions of every bill and vote in the Michigan House and Senate. Please visit http://www.MichiganVotes.org.
Students with special needs should have access to real choices
Overshadowed by important debates and competing proposals about the future of education in Detroit, a longshot legislative proposal to give special-needs students access to more opportunities has exposed the priorities of school choice foes.
House Joint Resolution B by Rep. Tim Kelly, R-Saginaw, would place a constitutional amendment before Michigan voters to allow families of special-needs students to use public funds to support their child even if they enroll in a private school. A favorable vote from two-thirds of House members would be needed to place the idea before voters on the ballot.
An onerous provision in Michigan’s state constitution currently takes public support for private school choice off the table. As a result, opponents could have hung their arguments on the monumental legal barriers and held their fire against the policy’s substance. Instead, as MIRS News Service reported, two legislators opposing HJR B revealed their weak hands.
Rep. Andy Schor, D-Lansing, offered an amendment in the House Education Committee that would have effectively gutted HJR B by requiring private schools to abide by the same regulations as public schools. “If it’s really about giving parents choices, the way Republicans claim vouchers are going to, then let’s make sure that the choices are absolutely equal,” Schor reportedly said.
Ensuring that Option A is exactly the same as Option B eliminates any real choice. Private programs would forfeit unique qualities that attract students, or more likely, choose not to participate. The proposed amendment would preserve the status quo, leaving one form of schools (private ones) available only to families that have the means to access them.
At best, families with enough means, like the Roes — who recently wrote about their struggle to rescue their daughter Mia from a frustrating situation — might be able get access to a better option for their children’s unique needs. But families clamoring for new options who are unable to afford them would remain stuck.
While Michigan clings to this decades-old ban on private school choice, 13 states have adopted special-needs scholarship programs that empower genuine choice for the more than 50,000 participating kids with various disabilities and learning challenges. These programs grow and thrive because they give many more families the educational services they desire:
- According to a 2008 audit of Utah’s Carson Smith Special Needs Scholarship, 89 percent of participating families reported better academic outcomes and 100 percent supported continuing the program.
- Far fewer Florida students reported being bothered or harassed once they used a McKay scholarship to select a private school, resulting in a 93 percent parental satisfaction rate, compared to 33 percent satisfied with their former school.
- A 2012 survey of families in the Georgia Special Needs Scholarship Program yielded even more dramatic results, with 98 percent declaring satisfaction with their new school, while only 14 percent were happy with the previous public school.
- Every single special-needs parent surveyed in Arizona’s Education Savings Account program reported satisfaction with their new learning options, including 71 percent who said they were “very satisfied.”
MIRS also quoted Rep. Adam Zemke, D-Ann Arbor, saying: “Unfortunately, this particular suggestion is cloaked in a veil of kindness — with the claim that it would help special education students — so it looks innocuous. At the end of the day, however, it's still a ploy to weaken public schools.”
This is the kind of argument that could have been credibly made before educational choice programs have proliferated across most states. Not only are families who use the scholarships happier, but they offer hope for other special-needs students as well.
Of 42 peer-reviewed studies conducted on the competitive effects of charters, vouchers, and scholarship tax credits, 20 have found a definitive positive impact on neighboring public schools, with 11 more showing somewhat positive trends. Only two of the 42 found even mixed to modest negative impacts. (The other nine yielded neutral findings.)
Special-needs scholarships in particular have not been as thoroughly analyzed. But a 2008 study of Florida found that more private schools accepting McKay scholarships for special-needs students also led to “substantial improvements” for disabled peers who stayed in nearby public schools.
Michigan’s legislative opponents of choice place a premium on protecting the status of the current system over other solutions that promise better overall service and satisfaction. But in so doing, they end up missing on both counts.
HJR B may receive no more successful votes this year. Our state’s burdensome constitution may have to be fixed another day. But choice opponents’ hollow arguments still badly miss the mark.
New bill would prevent local governments from overregulating grocers
A new bill in the Michigan Legislature would prevent local governments from banning or overregulating the use of plastic bags commonly used by consumers. Senate Bill 853, sponsored by Sen. Jim Stamas, R-Midland, would “pre-empt local governments from imposing regulations and restrictions on plastic grocery bags or other ‘auxiliary containers,’ defined as a disposable or reusable bag, cup, bottle, or other packaging.” The bill passed the full Senate recently and heads to the House.
Two Michigan counties, Washtenaw and Muskegon, are considering regulations on plastic bags, such as extra fees or a ban. A main argument is that they would help prevent littering. But the state already has laws against littering; if that’s the problem, then that’s what should be focused on.
And the research on the harm of plastic bags is mixed. As Michigan Capitol Confidential noted:
A study commissioned by the city of Austin, Texas two years after they banned plastic bags found a reduction in the use of plastic bags but also that people were throwing away reusable bags at a much higher rate than anticipated, mitigating the positive environmental effects. Other research has found that reusable bags often contain coliform bacteria and even a spike in visits to the hospital for E. coli potentially linked to bag bans.
Whether or not to use plastic bags should be decided by consumers. If individuals want, they can bring cloth or paper bags to the stores with them. And if there is enough popular demand, grocery stores are free to stop using plastic bags or charge extra for them.
My family chooses to use cloth bags when we grocery shop (especially since we are big fans of Aldi, which doesn’t provide bags). We’re grateful that we have the choice. Other consumers who prefer plastic bags shouldn’t have this choice taken away from them.
Michigan increases higher education spending by tens of millions
The Michigan Legislature is currently debating how much more it should spend on the state’s public universities. Gov. Rick Snyder and the Senate want to spend an extra $64 million while the House wants to spend an extra $51.6 million. These amounts would increase current spending by 3.4 to 4.2 percent, which is well above inflation.
Total state spending for public universities is at $1.5 billion, though the amount each institution receives varies widely. And what are we getting for that money? Not much.
Proponents argue that more college spending means more college degrees and a better-educated citizenry, which means a more prosperous state. But that proposition is not supported by the data.
Here is a chart comparing a state government’s spending on higher education and the state’s educational attainment. The vertical axis is the percent of a state’s population with a bachelor’s degree or higher while the horizontal axis is per capita spending on colleges. If there were a correlation, the dots would move higher from the left to right. They don’t.
As you can see, there is no correlation. But perhaps there is an anomaly in there. What about looking at this over a longer period of time?
Here is the same chart, but looking at states over nearly a decade, from 2005 to 2013.
Again, a basic look at the data provides no evidence that more spending will lead to a more educated population. If anything, there is a negative relationship.
If lawmakers are interested in improving the overall education levels of its residents, then simply increasing the tax dollars given to state universities is a poor way of accomplishing the goal. The state would be better served by discussing how to reduce the level of taxpayer dollars going to state universities and using that money for something else (or letting citizens keep the money).