Just A Reminder Of The Growing State Budget

Tax cuts cost much less than recent budget increases

Whichever candidate wins the governorship will preside over a growing state budget. Michigan’s budget has grown by $10.8 billion over the past eight years, a 9 percent gain when adjusted for inflation. State revenue — not including federal transfers or the small amounts of local and private dollars in the state budget — increased $6.8 billion, an 11 percent boost when adjusted for inflation.

There are 545,500 more jobs in Michigan than there were in 2010. Inflation-adjusted personal income is up by 19 percent. The growing economy means more money coming into Lansing.

An expanding state budget makes policy priorities more affordable. State estimators project that revenue to the state’s two largest funds will increase $1.7 billion over the next three years.

So it’s odd when tax cuts are treated as unaffordable to the state budget while spending is not. Republican gubernatorial candidate Bill Schuette’s call to lower the income tax rate prompted one reporter to observe, “Schuette has not identified how he’d fill that shortfall; $1 billion represents roughly 10 percent of the state’s general fund revenues.”

On the other hand, spending advocates have not explained how they have paid for the $10.8 billion increase in state revenues.

They don’t have to. Every year, policymakers set budgets, in which they negotiate over scarce resources. If tax cuts are a priority, then it’s no different from the hundreds of other compromises that go into a budget. The budget dictates who gets the gains from economic growth, and lawmakers have concluded that there are better uses for taxpayer dollars in the state government.

With the expanding economy and the growth of the state budget, however, the next governor can afford to let residents keep more of what they earn.

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.