West Central Michigan News

The COVID-19 pandemic and Gov. Gretchen Whitmer's perseverance in raising taxes actually hasn't jeopardized Michigan's finances.

If Michigan lowered its tax rate, it would make businesses in the state more competitive and give taxpayers more of their income to spend and stimulate the economy, according to James Hohman of the Mackinac Center for Public Policy.

The 2007 tax increase was supposed to be a temporary move as lawmakers were facing projected overspending, and raising taxes was considered a better approach than cutting the budget. The tax uptick was intended to boost revenue by $700 million annually and would eventually be phased out.

Michigan's financial problems haven't been alleviated from the tax increase, however. Instead, the national economy crashed, affecting Michigan's employment. The revenue for Michigan decreased by $3 billion, or 11%, in comparison to the years prior, according to the Mackinac Center for Public Policy. Federal bailouts stimulated spending in the state, and extra federal money helped the state recover.

State revenue has increased by over $10 billion since 2010. Part of the reason for the increase is that the income tax hike was not phased out, turning the temporary tax increase into a permanent one. The state budget growth means that the issues in 2007 no longer exist, and Michigan could manage to lower its taxes.

Lowering taxes to reflect pre-2007 levels would lower state revenue by $870 million, but it would still increase based on overall growth. In other words, even if the state's tax rate was lowered, Michigan would still have more to spend in 2021 than it did in 2020.

Affording a lower tax rate is transparent in comparison to other spending arrangements. There was talk in the Michigan Senate about $300 million in business subsidies, and some Michigan cities asked for $250 million. There are some lawmakers who also want to subsidize film production, which could have negative effects on taxpayers and the economy.

If lawmakers can afford to reduce taxes, it makes sense to most Americans to pocket more of their hard-earned income.