News Story

Analyst: Gov's Tax Plan Could Kill 30k Jobs in First Year

Governor Jennifer Granholm's tax hike proposal would wipe out 30,000 jobs in the first year, according to an analysis done by the Mackinac Center for Public Policy and the Beacon Hill Institute in Boston.

While the Governor's proposal does eliminate some taxes and does include some tax cuts, it would generate more than $940 million in new net taxes, according to the analysis.

"More money is redirected to Lansing," said Michael LaFaive, the director of the Morey Fiscal Policy Initiative at the Mackinac Center. "The state's insatiable appetite for revenue is driving job losses in Michigan. How much more can beleaguered taxpayers and workers take?"

LaFaive said by the third year, the number of lost jobs would be reduced from 30,000 to 13,500 because the tax cuts in Granholm's plan would start generating jobs.

The Granholm plan would lower the sales tax rate to 5.5 percent and expand it to services, raising $554 million in the first year. In 2012 and 2013, tax cuts would purportedly be phased in to make the hike revenue neutral. The total new net tax hike would eclipse $940 million.

A spokeswoman for the governor pointed out that LaFaive is a frequent critic of Granholm's policies.

"There he goes again," wrote Liz Boyd, the Governor's spokeswoman, in an e-mail. "The governor's tax restructuring proposal was actually based on recommendations from the Business Leaders for Michigan.  It would restructure taxes to reflect a 21st century economy, preserve funding for public education and fuel job creation by enhancing the state's attractiveness to businesses.  Not only would the sale and use tax rate be decreased but the base would be broadened to include other services.  In addition, the governor's proposal would reduce business taxes by eliminating the MBT surcharge and reducing the MBT gross receipts tax rate. By 2014 the reforms would be essentially revenue neutral."

"What an empty rejoinder," LaFaive responded. "I explained the Governor's proposal in my own work; although unlike Liz Boyd I did not leave out the part about the net tax hike that exceeds $940 million and kills thousands of jobs and lowers per-capita personal income."

The Mackinac Center and Beacon Hill Institute used the State Tax Analysis Modeling Program to come up with the projections. The program is used to measure the impact of tax increases and decreases in Michigan. They used data from the governor's proposal.