I’m currently in northern Michigan on business. I still remember the first time I visited the area over ten years ago with my then fiancee and was stunned when it didn’t look anything like Detroit. No flak jackets required. The cobalt blue waters of Grand Traverse Bay reminded me of the Virgin Islands and I enjoyed visiting the numerous wineries… although cherry wine still doesn’t quite compare to a good west-side Paso Robles red. The winters are a little harsh, but still beautiful. Little did I know that a few years later I would come to run a business that had a factory in the area, requiring regular visits. By the way, I just completed my 36th consecutive on-time flight. I will bless lottery tickets in exchange for 50% of the take.
I often receive inquiries from the state of Michigan trying to entice me to move the rest of my operations up here. They offer to subsidize construction, offset fees, and regale me with stories of all their great knowledge workers just aching to come to work for me. Unfortunately the cold is an immediate deal-breaker for me, almost as important as the lack of a bold cabernet. Not to mention the proximity of my mother in-law.
Today’s Detroit Free Press makes me think that instead of trying to convince companies to movie to Michigan, the state should focus on keeping the ones they have. The decline of the auto industry was obviously not due to the incompetence of state bureaucrats; that was due to the incompetence of the Detroit Three company and union management. The domino effect on other in-state suppliers seriously hurt state revenue, not to mention the livelihoods of tens of thousands of people.
So what did the state do? Instead of trying to help companies thrive so they could employ more people, it rejiggled the tax code to try to maintain revenue… in effect punishing the remaining companies.
Compared with what his company paid under Michigan’s hated Single
Business Tax, Bronner’s will pay about 500% more now under the new
Michigan Business Tax, a supposed improvement over the SBT that took
effect Jan. 1. The increase includes a surcharge approved late
last year so the state wouldn’t go broke. The shock to businesses
looking at their new tax liability could reopen the political debate
over the state’s business tax system and, even more broadly, Michigan’s
budget and fiscal policies as a whole.
James Jenkins, a Southfield accountant, said last week that he’s
facing an even stiffer bump in his business taxes, from $1,000 a year
under the SBT to $14,000 a year under the MBT. "I’ve got clients
that can move" out of Michigan, Jenkins said. "I suspect that some of
them absolutely will if this becomes too penal."
Apparently those bureaucrats, who have presumably never met a payroll
or paid a business tax bill of their own, have no clue about the Laffer Curve.
It’s been proven time and time again… you raise taxes past a certain
point and revenue goes down; cut them and revenue goes back up. Why do
you think pretty much every country in the world is reducing tax rates
while ours is inclined to raise them? Go
So while Michigan is trying to get me to move the rest of my operations from California to Michigan (note to my team who might be reading this post: this would be over my dead, Pinot-loving body), other states are salivating at Michigan’s idiocy.
State Rep. John Proos, R-St. Joseph, said Michigan could lose firms
to other states, including nearby Indiana. The Hoosier state has begun
to target Michigan firms with a marketing campaign to entice them to a
less-taxing environment. "This
is at a time when Michigan’s economy is struggling," Proos said. "Why
would we simply take the arrows out of our quiver and give them to the
State of Indiana to fire back at us?"
As the guy in the chair next to me just remarked as he grabbed my Free Press business section without asking, "Michigan business… does it really exist?" Michigan should look next door at Wisconsin’s efforts to support manufacturers and business in general, as well as how that state is leveraging lean manufacturing methods to dramatically reduce the cost and improve the delivery of state services.
A couple other supporting tidbits, also from today’s paper. First, an impending doctor shortage.
Aging and frustrated by bureaucracy, 41% of the state’s 40,000 licensed
physicians plan to retire from the practice of medicine in the state in
the next 10 years, according to a recently released survey of
physicians by the Michigan Department of Community Health.
By 2010 the state will have 4,400 fewer doctors than it will need as
the over-65 population doubles and an aging physician workforce calls
it quits, according to a 2005 report from the Michigan State Medical
Society, the state’s largest physicians group.
And then there’s the problem Detroit has with population density. As people move out, density has reduced dramatically, which is raising the cost of delivering city services.
I say we’ve got to start emptying out some huge areas of the city, and
encouraging people to relocate into more densely populated
neighborhoods. That makes the delivery of city services more efficient,
and effective, and eases the strain of servicing 139 square miles of
landscape that is just not that densely packed anymore.
A year ago we wrote how Youngstown, Ohio has a similar problem, and really is intentionally shrinking to create a nicer – and more enticing – city.
Perhaps it’s time for Michigan to take a different approach. It’s a beautiful state, especially the northern lakes region. Continue emptying the state and become a park! I’d come to visit… at least until the state tried to "improve" my experience by imposing a tourist tax. Don’t put it past them.