Lansings Deficit A Crisis Or An Excuse

February 4, 2005
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The past week produced more evidence that the Granholm administration merely fiddles with the peripherals of the budget crisis that it has bewailed from Day One.

Yes, to be sure, the governor inherited the deficit (like that never happened before). And, no, she’s not to blame for a pile-on recession that exacerbated the deficit.

But — a la James Blanchard and later Bill Clinton in Washington — she did profess to “discover” the deficit immediately after taking office. And where those other two executives used their deficits to justify tax hikes, Gov. Granholm used hers as an excuse to retard a tax cut. As for spending cuts, she pared funding for highways and the Life Sciences Corridor.

Retarding the tax cut likely prolonged the recession in Michigan. But rather than grapple immediately with the meat of the problem — too much spending on state payroll, health insurance and retirement programs — the governor ran town meetings. Her Treasury Department, meanwhile, began scraping for cash. Perhaps you recall some of the ways that Treasury prosecuted that search.

Remember the 50 percent late return fees it wanted to impose on small firms? Remember its mandate that all tax accountants file business returns electronically — the cost of connectivity to be borne by those accountants’ business clients? It was a classic indirect, targeted tax.

And just this week we learned (See stories on pages B6 and B7) Lansing tried using the trucking industry as a new revenue center, demanding regulatory fees for regulations that no longer exist. Moreover — contravening its own reciprocal agreement with 47 other states — Lansing required the state police to ticket truckers whose owners fail to buy $300 Michigan trailer license plates that aren’t even required.

A KentCounty judge halted the practice, which produced little revenue anyway because district courts routinely ruled against the citations. Nonetheless, the game wasted costly police time, costly truckers’ time and costly administrative time to dispute invalid citations.

Our tax dollars were at waste chasing other tax dollars. And there’s more.

In supposedly getting serious about the deficit, the governor agreed to exclude firms’ health insurance premiums from the Single Business Tax … and then proposed a 2 percent tax on premiums for all other insurance.

Much of Lansing’s problem lies in its tax structure, which, despite decades of superficial tweaking, remains perverse. It taxes a company’s payroll, not its profit, meaning that during recessions when profits are down, the SBT tax burden stays heavy.

Lansing framed it that way, so that regardless of whether business is struggling, Lansing would reap uninterrupted revenue. Never mind that the tax would be a drag on business development and expansion.

Lansing’s top priorities seem to be a comfortable living, regular generous raises and topnotch health insurance for state employees and office-holders.

Unfortunately, somewhere along the way, Lansing forgot how to do what its tax structure forces consumers and businesses to do in hard times: To sacrifice and cut spending.    

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