The MC: The Mackinac Center Blog

An Uber Driver Shares His Story

Op-ed explains efforts to permit and restrict ridesharing

A ridesharing entrepreneur who recently participated in a panel discussion at a Mackinac Center Issues and Ideas Forum in Lansing shared his story with Lansing State Journal readers in a recent op-ed.

Tim VanDongen began driving for Uber and Lyft as a way to make extra money, but eventually was earning enough to leave his primary job and make a career out of driving. Now, he has started a company, Ryde Media, which puts advertisements in Uber and Lyft vehicles.

VanDongen has experienced first-hand the many benefits ridesharing companies offer to drivers and riders, but is concerned that onerous regulations might crush such opportunity.

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Although this new service has the potential to provide thousands of new job opportunities to drivers and added convenience and reduced transportation costs to riders, it is limited in Michigan by government regulations that were developed when taxicabs were the only car-for-hire option and before smartphones even existed. As a result, consumers can only use Uber’s services in the six cities in Michigan that have explicitly given drivers permission to offer rides.

VanDongen, who is featured on the Mackinac Center’s Ridesharing webpage, explained that a package of “responsible and reasonable” bills moving through the House would allow drivers and riders to benefit from ridesharing services statewide. Unfortunately, bills making their way through the Senate would protect the taxicab industry at the expense of emerging technology.

A statewide approach to regulating this new industry makes sense. If regulations help promote safe ridesharing, then they should be as applicable in Detroit as they are in Traverse City. Further, drivers shouldn’t have to wait until their local municipality gives them permission to earn a living. In fact, last December Ohio created similar statewide regulations.

Read VanDongen’s entire op-ed at the Lansing State Journal.

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Sports writer and commentator Bill Simmons is transitioning from ESPN to a new show on HBO. In his promotional, “I Believe,” the never-gun-shy Simmons lays out some of his positions.

His last statement is the most notable: “I believe billionaires should pay for their own [expletive] stadiums.”

Michigan has a bad track record in this area. State and local taxpayers have coughed up huge for stadiums for the Lions in Pontiac (and then back to Detroit), for the Tigers at Comerica, and most recently for the Red Wings’ new arena. (Well-deserved praise is due for Bill Davidson, who owned the Pistons in 1988 and financed the Palace of Auburn Hills with no tax dollars).

Stadiums are almost universally panned as bad economic development tools. Andrew Zimbalist, a professor of economics at Smith College and one of the leading experts on stadium financing, writes, “All of the independent, scholarly research on the issue of whether sports teams and facilities have a positive economic impact has come to the same conclusion: One should not anticipate that a team or a facility by itself will either increase employment or raise per capita income in a metropolitan area.”

It’s too late for these past projects, but Michigan should learn its lesson for the future.

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Contracting Non-Instructional Services Can Help Students

Op-ed published in Chicago Daily Herald

Michigan’s success in contracting non-instructional services to keep money in the classroom was highlighted in a recent op-ed arguing the benefits of allowing districts to use private companies for janitorial, busing and food services.

The Chicago Daily Herald op-ed, co-authored by Michael LaFaive, director of the Morey Fiscal Policy Initiative at the Mackinac Center, and Kristina Rasmussen, executive vice president of the Illinois Policy Institute, explains why an Illinois law that makes it difficult for schools to use contractors for non-instructional services hurts children:

Michigan, for example, has more than 500 school districts. Thirty-one percent of school districts contracted out for busing, janitorial or food service in 2001. But it's worked so well that today that number is above 70 percent. …

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Surveys completed in four other states last year found similar acceptance of this trend. School districts estimated their savings from competitive contracting, which ran from $34 per student for food contracts to $110 per student for busing and $191 per student for custodial services.

Who would turn down another $191 per student in these tough economic times? Probably no one, which is why we need to put these savings back on the table.

Contractors, who specialize in offering their service, can also provide better quality, LaFaive and Rasmussen said.

Read the full op-ed in the Daily Herald.

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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.

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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.

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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.

They conclude:

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.

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Ridesharing Drivers Tell Their Stories

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?”

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Related Articles:

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How Forfeiture Should Work in Michigan

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.

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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.

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Mackinac Center and Sierra Club Call For More Transparency in Michigan Government

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.”

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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.

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Economic Interference Week

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.

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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.

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May 13, 2016 MichiganVotes Weekly Roll Call Report

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).

Who Voted “Yes” and Who Voted “No”

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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.

Who Voted “Yes” and Who Voted “No”


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.

Who Voted “Yes” and Who Voted “No”


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.

Who Voted “Yes” and Who Voted “No”


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.

Who Voted “Yes” and Who Voted “No”


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.

Who Voted “Yes” and Who Voted “No”


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."

Who Voted “Yes” and Who Voted “No”


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.

Who Voted “Yes” and Who Voted “No”


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.)

Who Voted “Yes” and Who Voted “No”


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.

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