Kayak Tax Proponents Try to Disguise Cash Grab as Safety Measure

Adding onerous education requirements should not make tax more palatable

Last fall, some Michigan sheriffs began calling for a new tax on nonmotorized watercraft like kayaks, canoes and paddleboards. They say that requiring Michiganders to register these boats will generate needed revenue. Although both the House and Senate have passed resolutions opposing the “kayak tax,” some proponents of the tax haven’t given up on getting it passed.

Detroit News columnist Daniel Howes describes how to overcome this apparent defeat by using a different tack: “the tax-the-paddlers crowd might have a more compelling argument if the proceeds from the registration fees were earmarked for safety training.” Howes cites the argument that if motorboat operators must take safety courses, paddlers should be required to do the same.

But not all motorboat operators have to take safety courses in Michigan. Anyone born before July 1, 1996, can legally drive a motorboat without completing any mandatory safety course. And for “personal watercraft” — jet skis, waverunners and the like — a boating safety certificate is only required for people born after 1978. Howes is essentially proposing creating stricter regulations for paddling a kayak than for flying around in a 300-horsepower Four Winns.

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Further, requiring paddlers to obtain a boater safety certificate would put Michigan in a class of its own. While about half the states require a boater safety course for some operators of motorboats or sailboats, according to U.S. Coast Guard, no state requires a boater safety certification for the operation of paddle craft.

Attempting to recast this naked cash grab as a public health and safety measure is misguided. If there really is a problem with funding Michigan’s water-related infrastructure or first-response teams, it certainly won’t be resolved by creating a new and totally unprecedented tax on the more than 600,000 people just trying to enjoy Michigan’s great outdoors. Kayak tax proponents should seek other avenues for identifying and remedying alleged funding shortfalls.


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The Lawmakers that Voted for the Most Business Subsidies and the Least

$16 billion in corporate welfare approved since 2001

Michigan voters can now see where their lawmakers have stood on state business subsidies from 2001 and into the current legislative session. A new scorecard from the Mackinac Center and MichiganVotes.org shows where every lawmaker came down on votes for corporate handouts that pit regular taxpayers against select business interests and developers.

Michigan lawmakers have authorized the state to spend a lot of money to subsidize businesses since 2001: $16 billion, in fact. That is more that the value of the Lions, Tigers, Pistons and Red Wings with plenty leftover. Or in state budget terms, it could pay off state employee pension debt or resurface nearly all of the state’s highways.

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These amounts have been pledged in the name of creating or retaining jobs in the state. But by taking tax dollars from everyone and delivering them to a favored few, the lawmakers have cost the state jobs rather than added them.

It’s not a Democratic failure or a Republican failure: Business subsidies are a bipartisan affair. Over 17 years, the average Republican approved $1.47 billion in business subsidies during his or her tenure, and the average Democrat approved $1.62 billion.

The overwhelming majority of legislators, both Republicans and Democrats, have voted for business subsidy programs, but Republican voters have been more likely to elect a small minority who oppose subsidies. There were 17.0 percent of Republicans who opposed more than half of the business subsidies they voted on while in office. Only 6 of 233 Democratic legislators, 2.6 percent, opposed more than half of the business subsidies.

In 17 years, 22 lawmakers opposed every business subsidy the Legislature approved while they served. Only one was a Democrat (Rep. Rose Mary Robinson of Detroit).

The scorecard covers two years at the end of the final Engler administration, the entirety of the Granholm administration, and all but the final year of the Snyder administration. Gov. Jennifer Granholm agreed with the Legislature to approve $12.6 billion in business subsidies. Gov. Rick Snyder has agreed to $2.5 billion in subsidies so far.

The amounts covered include the authorized cash transfers to corporations, plus related administrative expenses. In most cases, the numbers came from fiscal agency or department estimates that were developed during the time when each measure was being considered. When these were not available, we used estimates that state program administrators developed.

Not all of the dollars that were authorized were delivered to corporations and developers, though legislators voting to approve them did not know that when the vote occurred. And every dollar that has been delivered was done so because legislative majorities approved one of these authorizations.

The scorecard includes only laws that take money from some taxpayers and give it to others. That includes state grant programs and other forms of direct support approved in annual budgets as well as refundable business tax credits. State revenue estimators expect to pay out $758 million more in credits to companies than the companies owe in taxes this year.

The scorecard excludes other kinds of business favors like selective property tax abatements and nonrefundable business tax credits.

The scorecard covers 37 laws passed since 2001. It includes only votes where approving new subsidies is the primary intent of the law. Subsidies thrown into massive budget bills, for instance, are excluded.


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'Clear and Convincing Need' Bill Would Limit Overregulation

Proposed law would bring more Michigan rules in line with federal government

Nearly one year ago, the Michigan House of Representatives passed House Bill 4205 by a 57-50 vote. The bill was designed to limit state agencies’ power to intrude on the lawmaking duties of the Legislature, but, it has stalled and is gathering dust in the Senate. Although Gov. Rick Snyder has vetoed similar legislation in the past, State Rep. Jim Runestad, a Republican from White Lake Township and co-sponsor of the bill, reports that Snyder has said he will sign the bill.

The legislative analysis from the State Fiscal Agency says that the bill restricts state agencies from proposing or implementing a rule that is “more stringent than an applicable Federal standard.” It does, though, allow a department to issue a more stringent rule if there is an emergency — and if the Legislature agrees. It also allows for an exception if the “agency director determined that there was a clear and convincing need to exceed the applicable Federal standard.”

The current version of the bill passed largely along party lines with 90 percent of Republican representatives voting for it and all House Democrats voting against it. Environmental groups have attacked the bill as a “contender for the worst Michigan environmental bill of the 21st century.” But, supporters heralded it as a lifeline for small businesses and people that are forced to navigate reams of paperwork and pay thousands of dollars in compliance costs to both state and federal departments.

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“Rules and regulations have a disproportionate impact on smaller companies,” Amanda Fisher, assistant state director of the National Federation of Independent Business – Michigan, told the House Oversight Committee in March 2017. The “difference can be as much as 36 percent between the costs incurred by small firms when compared to their larger counterparts.” Fisher added that businesses with fewer than 50 employees paid approximately $11,724 per employee to comply with federal regulations in 2012 – up from $10,585 just two years previous. Piling on repetitive and unnecessarily strict state regulations only adds to that bill.

Rep. Tristan Cole, R-Mancelona, introduced the bill in March 2017. “HB 4205 is a bill we call ‘No greater than the Feds,’” said Denise K. Pallarito, Cole’s legislative director.

Runestad said it would make the state more attractive and competitive for new business. “Departments promulgating rules that go beyond federal regulations are sometimes necessary when they deal specifically with … situations unique to Michigan. However, too often rules are dreamed up that are ridiculous, inane and go well beyond the rule of law and are seemingly arbitrary, which is why I strongly support this bill.”

Fisher characterized the bill as commonsense legislation because it would require any rules that are more strict than existing federal regulations to receive extra scrutiny and justification.


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House Bill 4158, Require conviction for property forfeiture to police: Passed 83 to 26 in the House

To establish that property seized from a person because it may be associated with a suspected drug crime is not subject to permanent forfeiture (loss of ownership) unless an individual is actually convicted. However, the conviction requirement would only apply to forfeitures of less than $50,000 (meaning police and prosecutors could still take and keep assets worth more than that using a lower burden of proof).

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House Bill 5828, Authorize state school safety commission, inspections, grants: Passed 98 to 11 in the House

To create a state school safety commission to devise and promulgate a comprehensive school safety plan, and authorize inspections that would grade schools on their adherence to its guidelines. The bill authorizes a grant program for schools to adopt safety measures but does not identify where the money would come from.


House Bill 5851, Require schools submit threat reports: Passed 69 to 40 in the House

To require public schools to file annual reports with details of all attempted acts of violence on school grounds that were thwarted, and all threats of violence against the school, staff or students. The State Police would be required to compile these into a secret annual statewide report for the School Safety Commission proposed by House Bill 5828.


House Bill 5830, Require new schools meet safety protocols: Passed 97 to 12 in the House

To require new or renovated school buildings to include a combination of safety measures specified in the bill, as determined by the school safety commission proposed by House Bill 5828. Among the measures are state-approved layouts, surveillance technology, reinforced entry doors and remote door locks.


Senate Bill 803, Create state building alcohol sales ban exception: Passed 103 to 3 in the House

To permit alcohol sales in a state-owned building that is at least 1 million square feet in size and leases space to a private company that serves the public and has a liquor license. This is said to be for the state-owned Cadillac Place office complex in Detroit, which has some state offices but is mostly vacant.


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 www.MichiganVotes.org.


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Token Symbols of Growth Damage the State Economy

Select business interests have higher status with lawmakers than regular taxpayers

When it comes to creating jobs, lawmakers find themselves in a dilemma. They can improve the business climate for everyone, which encourages growth but makes it hard to claim credit for creating jobs. Or they can give tax money to select firms, which lets them take credit for a new business groundbreaking, regardless of whether the costs of the subsidies are worth it.

A better business climate will actually make people’s lives better. Giving money to select interests, on the other hand, shifts money around and typically leaves people worse off.

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Business managers are not waiting around for politicians to tell them what to do. And that’s why most economic growth happens without lawmaker approval. Most job growth happens without lawmakers taking money from taxpayers to give to select companies.

According to the Bureau of Labor Statistics, Michigan lost 221,400 jobs in the third quarter of 2017 and gained 196,700 jobs. This is only the third quarter in the current recovery that saw a net job loss. Meanwhile, state officials announced that they were going to deliver subsidies through the Michigan Business Development Program to 23 companies that pledged to create 3,700 jobs. If the state had to rely on the few businesses that receive taxpayer money to replace the jobs lost in the quarter, it would only be able to replace 1 out of 60 jobs.

The business subsidy program is far less beneficial than advertised. For one thing, it’s rare for all the promised jobs to show up. Even worse, when you look at the net costs of the program, you’ll find that for every half million it spends in an average county, the county loses 600 jobs.

These targeted business subsidies simply don’t work. Instead, lawmakers can find ways to operate governments more efficiently and use the savings to lower the tax burden. Or they can re-examine regulatory burdens, such as occupational licensing requirements, much of which make it harder to create jobs without protecting consumers. Both steps would encourage more job growth and less job loss. And they would be actual improvements to the business climate instead of the token symbols of growth delivered by select subsidies.

At bottom, however, the question is whether select business interests have higher status among lawmakers than regular taxpayers. There are a few that get these deals and everyone else has to pay for them. If these deals were actually able to generate broad economic growth, that would be one thing. But since they fail to live up to their promises, these subsidies show just where regular people stand compared to the ones getting special deals.


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Solar Subsidies Are More than 'Fair'

Those selling a wholesale product should be paid the wholesale price

It’s no surprise that taking a stance on a contentious issue will bring on cutting critiques. Emails pointing out a perceived error on a public stance are to be expected. Some contention may also arise when readers see a Mackinac Center blog post that sides with the Michigan Public Service Commission. It’s unusual, but it does happen because the Mackinac Center strives to be pro-free markets as opposed to pro-business. So, when a business veers from free markets into seeking special favors and protections, we will find ourselves on the opposite side — even if it means agreeing with a government agency.

For example, we recently received an email response to our post on the public service commission’s April 18 ruling on net metering. The bulk of that email follows.

Imagine if you have a garden in your back yard and the state mandates that you must sell to the grocery store any excess vegetables at whatever price they want to pay you. Is that fair? This is what this tariff does but worse is that this happens every minute of every day (so if you harvest on the weekend and you have excess you cannot put it in the fridge you must sell the vegetables to the utility at a discounted rate). And the store gets to keep the profit of selling your vegetables to your neighbor.

The garden analogy is a worthwhile attempt to put the net metering issue into more easily understood terms. Our critic also offers a valid critique of the oppressive and market-disrupting nature of Michigan’s regulated utility system. There is no doubt that forcing a government-protected, monopoly electricity system into the lives of Michigan residents gives us all less choice, as well as less reliable and more expensive electricity. But, the correct response to the monopoly utility problem is not more government intrusion and market disruption. Piling on additional costs and interferences is a recipe for more failure. The correct response is to advocate a larger role — not a smaller one — for free markets. On that note, the critique needs a few clarifications to help the analogy better reflect reality.

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First, in real life, Michigan’s renewable portfolio standard mandates the state’s people and businesses obtain 15 percent of our electricity from renewable sources by 2021. To use the analogy, the state government has set aside 15 percent of the writer’s imaginary grocery store for organic farmers, and only they can sell their produce in that section. To extend the analogy a bit further, the people shopping at the imaginary grocery store MUST buy this organic produce first – regardless of the cost. In fact, they are legally barred from buying any other products from the store unless they meet the 15 percent mandate. That’s hardly a fair option – to use the critic’s chosen metric – for the customers of the store. Is it?

Second, in real life, state and federal governments have lavished special tax credits and subsidies onto solar energy, meaning a substantial portion of the cost people pay for solar panels has been socialized across the nation’s taxpayers. To put that in terms of the garden analogy, government has paid for, or has given targeted tax breaks to the farmers for any seed, fuel or tools that they used to produce their organic crops. Those special favors make it possible for the farmers to sell their vegetables at an artificially lowered cost. But, if those farmers can use government to force the grocery store to pay an increased price for their produce, even up to the full retail cost, the organic farmers can pocket that much more profit. Thank you Mr. and Ms. Taxpayer. Again, is this fair for the average taxpayer and electricity rate payer?

Third, in real life, electricity must be sold and consumed as it is produced. While ongoing research may change that fact, there is currently no affordable, reliable means of storing the electricity produced by solar panels. Therefore, electricity goes into the grid and is consumed almost immediately. Additionally, a cloudy day or inclement weather can drastically reduce the amount of electricity solar panels produce. To put those constraints in terms of the garden analogy, organic farmers would have no viable way to store their produce. If they can’t sell it within a few seconds after it comes off the vine, it rots and must be discarded. Additionally, the grocery store and its customers can’t be sure the farmers will produce anything on a given day. Clouds overhead may mean grocery store customers just have to go without … or not. You never really know.

Lastly, in real life, solar panel owners are able to sell their excess electricity only because they are using a heavily subsidized generation source that is connected to a grid that was paid for and provided by other grid participants. To exist in an actual free market, the people or businesses with solar panels would need to act very differently than is the case now. They would need to pay the unsubsidized price for their solar panels, set up a “stand alone” solar array (meaning no connection to the grid), set up batteries to store their excess electricity production, and do all of this at their own cost. Then they would need to hope that they could market that stored electricity to someone else, a customer who is willing to pay the retail price solar panel owners believe they deserve. In the imaginary gardening world, they would need to fully fund their own land for the garden, plus costs for irrigation, harvesting, refrigeration and so forth. They would need to store and transport their produce to a grocery store, and then sell their produce at the price that store was willing to pay.

At the very best, it is hypocritical for those operating in a heavily subsidized industry, or those making use of taxpayer-funded opportunities to complain that it isn’t fair they haven’t received even more from those taxpayers. Complaining they are being ill-treated because they are offered less than full retail price for a wholesale product smacks of an entitlement mentality.

In this case, the garden analogy was a useful tool for trying to explain the net metering issue. But, critics must ensure they address the full scope of the discussion before claiming they are being unfairly treated. Pointing out failures in legislation and policy options is a valuable effort, but attempting to correct those failures with more market disrupting policies is ultimately self-defeating.


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Senate Bill 863, K-12 School Aid budget: Passed 27 to 9 in the Senate

The Senate version of the K-12 school aid budget for the fiscal year that begins Oct 1, 2018. This bill would appropriate a total of $14.732 billion, compared to $14.580 billion approved last year. Of this, $1.724 billion is federal money. The House budget version proposes spending $14.823 billion. School districts with lower revenue would get a $230 increase in per-pupil aid, and higher spending ones would get an extra $115.

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Senate Bill 856, Welfare and Medicaid budget: Passed 27 to 9 in the Senate

The Senate version of the Department of Health and Human Services budget for the fiscal year that begins Oct. 1, 2018. This covers welfare and Medicaid spending and is by far the state's largest annual appropriation. The bill would authorize spending $25.117 billion, of which $18.345 billion is federal money and the rest is from state and local taxes and fees.


House Bill 5100, Exempt bike racks, tow balls, etc. from ban on obscuring license plate: Passed 36 to 0 in the Senate

To establish that removable bicycle racks, trailer hitches, tow balls or similar devices are not included in the definition of “foreign materials that obscure or partially obscure” vehicle license plates, which is a civil offense. This would also apply to the object carried by the device.


House Bill 5767, Let alcohol producers and wholesalers sponsor beer tents: Passed 105 to 2 in the House

To revise the extraordinarily detailed law establishing a comprehensive regulatory regime on the wholesale distribution of beer, wine and liquor, so as to allow manufacturers, wholesalers or retailers to get a special license to hold a beer or wine festival in which they provide the sponsor with beer or wine dispensing or cooling equipment and a brand-logoed tent.


House Bill 5391, Impose regulations on electric skateboards: Passed 96 to 13 in the House

To prohibit riding an electric skateboard at a speed greater than 25 mph, and ban riding one on a street with a speed limit greater than 25 mph. The bill defines electric skateboard as one that is “no more than 60 inches long and 18 inches wide, is designed to transport only 1 person at a time, has an electrical propulsion system with power of no more than 2,500 watts, and has a maximum speed on a paved level surface of not more than 25 miles per hour.” Riders could go on streets subject to the same rules as bicycles.


Senate Bill 297, Mandate electrician have proof of licensure while on job: Passed 89 to 20 in the House

To mandate that an electrician on a job must show a government official or inspector a photo ID and evidence of licensure status if ordered. Also, to only allow an individual to get a "master electrician" license if an individual has at least 12,000 hours of experience in related work under the supervision of a master electrician, and has held an electrical journeyman's license for at least two years.


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 www.MichiganVotes.org.


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Proposed Bill Package Would Rein in DEQ Abuses

Landowners should have an easy appeal process for rejected permits

The growth of the administrative state grows apace, prompting countermeasures that protect the citizenry from arbitrary enforcement of rules and regulations promulgated by unelected government officials.

This may sound like a 2010 Tea Party pamphlet, but it's actually a sentiment I heard many times between 2006 and 2010. During those years, I traversed the state with my old boss Russ Harding, then the director of a Mackinac Center property rights initiative, meeting with groups and concerned individuals on the issue of governmental overreach and abuse.

Then, as now, it was apparent that regulators with the Department of Environmental Quality – Harding was its first director – sometimes abrogated citizens’ property rights in the service of vaguely defined environmental protections. Too often, we witnessed, government employees prioritized mud puddles and drainage ditches over allowing landowners to perform completely benign property improvements.

Challenging the DEQ or Department of Natural Resources was no small feat, requiring thousands if not millions of dollars to navigate the administrative and judicial labyrinth. At some point, it dawned on me that shining the light of transparency on what we saw as grave injustices and abuse of power by – no doubt mostly well-intentioned – government employees would never be enough. The situation required, suggested my wise superior, a neutral ombudsman who could weigh the pros and cons without breaking the bank of citizens and businesses.

As if from his lips to the ears of Sens. Tom Casperson, R-Escanaba; Darwin L. Booher, R-Evart; and David Robertson, R-Grand Blanc; Senate bills 652, 653 and 654, respectively, seek to satisfy the concerns of both environmental and natural resource regulators and private property owners. Briefly, the bills would require DEQ oversight (SB 652) and establish a permit-appeal panel (SB 653). SB 654 would establish a nine-person Environmental Science Advisory Board to advise the governor and any state office, agency, or department specified by the governor on environmental and natural resource issues in Michigan.

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Robertson – who sponsored SB 653 – says the three bills address the needs of Michigan property owners who, rightly or wrongly, run afoul of the DEQ and DNR. “Even the best-intentioned and most knowledgeable government employees sometimes get it wrong,” he said. “Appealing a rejected permit can be quite costly.”

Speaking specifically on his bill, Robertson continued: “It’s important that science and reason rather than emotions and opinions guide our permitting process.” The proposal would allow the DEQ director to negotiate a settlement with a permit petitioner. It would also call for the director to name five people to an appeals panel, which would be convened whenever the director and a petitioner could not resolve their dispute. After receiving the panel’s conclusions, the director must issue a final decision that incorporates the panel’s decision into the terms of the permit.

Casperson is the sponsor of SB 652, which would create a new committee, the Environmental Rules Review Committee, to oversee all rulemaking activity in the department based on specified criteria developed by the committee. All rules meeting the committee’s criteria would be subject to a public hearing.

Oftentimes, state regulators are given carte blanche to exercise their own discretion, said Casperson. That discretion becomes the opinion that approves or denies an applicant’s permits. “If you read through the rules, they make sense because they establish standards that are easily understood,” he said. “But, it’s the final paragraph that grants the field agent discretion on whether to approve or deny a permit, which is where we’ve gone off the rails.”

“Because the regulator has college degrees and the weight and authority of his or her department, the applicant is often left in the lurch unfairly,” Casperson said. He added that the bills give property owners an avenue for airing their grievances.

“I’ve worked with several businesses in the Upper Peninsula who have employed or contracted outside environmental consultants who hold precisely the same degrees from the very same universities as the DEQ officials – yet the discretion of the DEQ agent is granted the final say on whether a permit is granted or not.” He added: “From my experience, this discretion is not based on rules or science, but only a personal opinion or agenda.”


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City Denies Alcohol License to Restaurant it Doesn’t Like

Royal Oak officials discriminate against fast food restaurant

A Taco Bell Cantina (photo by Steevven1 at Wikicommons).

A city in Michigan is denying an alcohol license to a restaurant, apparently because government officials don’t like the style of service and type of food offered there.

According to the Detroit Free Press, Royal Oak city officials voted to deny an alcohol license to a Taco Bell Cantina “after police expressed opposition.”

Commissioner Kyle Dubuc said that the Taco Bell Cantina didn't fit with the city's vision for the bistro-style licenses.

"I would say more that when we think of unique concepts that would not include national fast-food chains," DuBuc said. "Think locally managed, local concepts that are bringing a kind of unique flavor and unique identity."

But the Taco Bell Cantina is locally owned — it’s just a franchise of Taco Bell. The “cantina” brand is an intentional effort to give the restaurant more of a local feel, and it has been rolled out in large cities throughout the U.S.

The attorney for the owners of the Taco Bell Cantina in Royal Oak said they had planned to serve craft beer and liquor from local brewers and distillers. The location had been vacant for nearly four years, but the restaurant invested $750,000 to develop it and hired 20 employees. If the license had been approved, they planned to hire 20 more.

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"People keep on coming in, wanting slushy margaritas," [attorney Jim] Rasor said. "And we don’t have them, and they leave. The location is not doing type of numbers that are going to sustain it without these new novelty alcohol drinks ... (It) may very well turn into another vacant storefront on Main Street."

When city officials decide who gets a liquor license, they should not discriminate based on their personal opinions about the food or atmosphere of the restaurant. If a legal business or individual follows the proper procedures, government rules should be fair to everyone. And if city officials feel they need to protect local residents from substandard food, they should rest assured that market competition has been providing that service very well for centuries.


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No More Additional Favors for Solar

Property taxes should tax the value of property, including solar panels

It’s a good thing when people who are concerned about their ecological footprint spend their own money to install solar panels on their homes. It’s a bad thing when politicians attempt to exempt these decisions from normal tax policy.

The property tax is the largest tax in the state, raising $14 billion. Tax collections are distributed to the state and to local governments, schools and other taxing authorities. But there is a bill in the Michigan Legislature that would exempt small-scale solar panels on residential property from property taxes. Some advocates are calling for even more tax preferences for solar panels.

The property tax is based on the value of property. If solar panels make a home more attractive on the real estate market, its tax levy should reflect that.

Taxpayers have a constitutional protection that keeps their property tax burden from increasing above inflation due to market gains. But adding to your house by installing solar panels adjusts that base.

Lawmakers have thus far resisted using property tax exemptions to give favors to certain industries. That hasn’t been the case for other taxes. People who trade in their cars, for instance, only have to pay sales taxes on the difference in value between the car they buy and the car they traded in instead of the whole value the purchased vehicle. This privilege was lobbied for by car dealers around the state.

State politicians should resist using the tax code to hand out favors. Taxes with a broad base and a low rate raise more revenue with less negative impact on the economy. Those bases get narrowed when lawmakers use tax policy to grant favors.

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Besides, the solar industry already enjoys too many favors. Solar panel manufacturers have been awarded government subsidies. Installing solar panels gets homeowners income tax credits. And selling energy from home solar arrays on the electric grid earns homeowners retail market prices (though this favor may soon be on its way out). Each of these favors are in addition to the state mandate that requires 15 percent of electricity to come from renewable sources like wind and solar by 2021.

Assigning a value to solar panels for taxation purposes can be a bit tricky because there aren’t that many homes with solar panels. Additionally, in some areas, adding solar panels may be more of a liability than an asset since there are upkeep costs that may scare away potential buyers. One real estate agent equated it to trying to sell a home with a swimming pool — not everyone will pay extra for it.

Despite the challenge, there is a simple cost-benefit analysis that can be done to better understand the proposed property tax exemption. If the goal is to produce more renewable energy, then the cost of the exemption can be compared to the benefits of solar production.

According to Mlive, Ann Arbor has a rule that increases a home’s market value by $1,100 per kilowatt of installed solar, calculated off city tax rates. Therefore, an 18-panel rooftop array, which produces approximately six megawatt hours of electricity annually, would increase the taxable value of a home by $5,300. That means that exempting solar panels would be a favor that costs state and local governments $176 in annual property taxes. That favor would cost less in places without a strong market for homes with solar panels.

The cost of this favor can be compared to the cost of a renewable energy credit on the open market, where six megawatt hours’ worth of credits may cost up to $150 per year or as little as $48 per year. Thus, it costs more to exempt solar than it does to buy renewable energy credits, though this may change depending on the market and local property tax rates.

It gets worse for the cost-benefit calculation. The benefits of increased solar energy use would only come from those people who choose to install solar panel as a means of obtaining the new solar panel exemption. That would be those who needed an extra $176 in incentives to choose a solar array. Meanwhile, the costs to the system would be generated by everyone with a solar panel array. This magnifies the costs and limits the benefits of an already shaky cost-benefit calculation.

If the goal is to generate more renewable energy, it is more effective to enter the market for renewable energy credits than to give tax exemptions for household solar arrays.

There are already subsidies at every step of the process needed to install solar. Lawmakers should re-examine the favors already extended to this power source instead of looking at new ways to expand them.


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