The Mississippi Example
In an October press conference, Gov. Jennifer Granholm argued that tax hikes are necessary. "What we're fighting for is Michigan not becoming Mississippi," she said. (See related story, "Mississippi Not Burning.")
The rhetorical flourish is undermined by the reality that Mississippi is no longer the "small government = high poverty" foil that Michigan's political class has often used to justify keeping their government employee constituencies well-fed with more tax dollars.
Plus, Mississippi has a growing economy — a concept that has begun to seem exotic in this state.
The evidence on Mississippi's changing fortunes is complicated, but tells the tale nevertheless. Whether its relative tax burden can be considered low depends on what exactly is compared.
For example, because Mississippi has been relatively a poor state going all the way back to colonial times, its per capita tax burden remains relatively low today.
However, its tax burden per unit of economic output (as measured by state Gross Domestic Product) is the 13th highest (Michigan is 18th).
Also, it's the 12th highest in terms of total state and local government revenue as a percent of personal income (Michigan is 15th).
Overall, a ranking of the structure of state taxes by the Tax Foundation places Mississippi in 21st place (Michigan is in 17th place, thanks largely to its flat income tax and lack of local government sales taxes). In general, Mississippi has a moderate tax environment, and is hardly the epitome of small-government.
That said, unlike Michigan, Mississippi has experienced some growth in this decade:
Over the last five years, Mississippi ranked 18th in per capita personal income growth. Michigan was dead last.
Mississippi's real (inflation adjusted) Gross Domestic Product rose by 5 percent over the last five years. Michigan's lost 4 percent.
Mississippi payrolls grew by 2.9 percent between 2003 and 2008. Michigan's declined by 5.8 percent.
While Michigan's poverty rate increased by 9 percent since 2005, Mississippi's has stayed about the same. Mississippi still has the highest poverty rate, but unlike Michigan, it's not getting worse.
If Michigan's political class is worried that failing to impose higher tax burdens on residents will make us "like Mississippi," they can relax. On the other hand, if finding new ways to deliver more for less tax dollars helps Michigan rediscover something Mississippi has been enjoying — economic growth — they'll actually have something to boast about.
James M. Hohman is the fiscal policy analyst at the Mackinac Center for public policy. He may be reached at firstname.lastname@example.org.
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.