Other tax cuts

If Proposal A is the greatest success, then in some ways phasing-out the intangibles tax drew the most fire as being a sop to the rich and showing the administration was concerned more with the well-to-do.

Enacted in the 1930s, during the Great Depression when Michigan did not have an income tax, the tax was collected off of dividend and interest income, and was paid largely by the wealthy.

Mr. LaFaive, however, said that it makes sense to provide some tax breaks to the wealthy since in the end they pay the most taxes. Most millionaires are self-made, and the state needs that entrepreneur class to boost its economy, he said.

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And Mr. Roberts said the arguments that the intangibles tax elimination was geared at the wealthy misses the larger point: "It was a bad tax. No one should have paid it."

In fact, eliminating the intangibles tax and the state's inheritance tax had other social values: it helped keep wealthier people, especially older wealthier people, in Michigan, he said. "Does it make a difference that grandma and grandpa are here and close to their children and grandchildren, I would argue that it does," he said. Now, "grandpa and grandma may still go to Florida in the winter, but they're not selling the home here."

Mr. Studley also lists elimination of the inheritance tax as one of the top three tax moves in the administration, along with Proposal A and the SBT phaseout. The state still collects inheritance taxes, but through a piggyback off the federal tax now itself being phased out.

From both ends of the political spectrums though, criticisms continue on how the administration enacted tax policy.

For Mr. LaFaive, one of the biggest issues is the idea of targeted tax cuts through the Michigan Economic Development Corporation. A series of new breaks were announced Tuesday, in fact.

The policy simply picks winners and losers and that is bad policy, he said. Ironically, when Mr. Engler came into office it was his dream to end such economic development incentives. He even tried to convince other states to do the same.

Other states would not, and the bidding war for major companies grew across the country. Whatever the economic arguments, politically Michigan decided to join the fray with the Michigan Economic Growth Authority and the MEDC and other programs, concentrating its focus first on keeping companies in Michigan and encouraging their expansion and then on bringing new companies into the state.

Ms. Parks said that tax policy should be targeted to those who need it most, and tax changes should take into account overall fiscal impacts.

The phaseout of the SBT, now paused, and the cut in the income tax rate has led directly to the deficits Michigan now faces, she said. And when the state has increasing need for its services, it will face continued budget cuts and the people needing help will struggle more, she said.

"We have to look at tax cuts where and when we can afford them," Ms. Parks said.

Mr. Roberts said that is looking at the budgetary question backwards. "Every year one half of the budget has to be voted on and the other half, the revenue half doesn't," he said. Perhaps it would make more sense to require lawmakers to vote on the taxes they would impose first every year and then vote on appropriations, he said.