Letter: State Burdens Manufacturers

August 12, 2005
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Editor:

After reading the editorial "State's Political Leadership Is Embarrassment" (Business Journal, July 18, 2005) I, too, wonder how many more jobs in this state will be lost before we understand simple economics.

Manufacturers are the creators of, and importers of, wealth. By example, over 95 percent of Herman Miller's sales are generated outside the state of Michigan, with resulting revenue brought back to this state from across the U.S. and around the world. A large portion of that capital is paid out to our employees, and those of our many Michigan-based suppliers, including both manufacturers and service providers. That manufacturer-created imported wealth is a "multiplier," injecting lifeblood into the service sectors of the economy as employees buy from retailers, grocery stores, restaurants, banks, and, yes, even purchase insurance. Without dollars produced through the "export" of Michigan's manufactured goods, where and how are the consumers of these local services, and the relying businesses and their employees, going to generate economic wealth?

We have a tourism industry, but this alone cannot hope to sustain our state. If we don't act decisively and immediately to support the "exporting" manufacturers of Michigan, we will continue to lose them, gradually transferring our economic wealth elsewhere as we purchase goods produced out of state and lowering our state's living standards.

Manufacturers are mobile, while service businesses are generally serving customers within a modest radius of their location. They have little or no out-state competition, and rarely sell beyond their immediate marketplace.

Neighboring states' leaders in the Great Lakes region, Republicans and Democrats alike, have already figured this out. These states have eliminated all personal property taxes at least on machinery and equipment. Michigan is the only regional state that still imposes one of the highest local city/county/school tax rates in the country on the billions of dollars that manufacturers have invested in their operations.

Michigan's elected officials continue to impose extremely costly taxes on the very behavior they claim they would like to encourage. Encouraging invested manufacturing capital in this state will create good jobs and revenue for all Michigan's businesses, manufacturing and service sectors alike. Discouraging manufacturing capital investment has the opposite effects.

Meanwhile, banks complain about a proposed increase to their relatively modest tax burden. Today banks pay no personal property taxes, used to fund our K-12 schools and the city and county government services, which they consume. Similarly, Michigan-based insurance companies threaten that paying a 2 percent premiums tax will hurt Michigan citizens. But the fact is that the great majority of us buy insurance products from insurers based outside the state of Michigan, that already are paying this tax.

Today Michigan's manufacturers struggle with a state tax burden among the five highest in the U.S. while most of Michigan's financial services industry enjoy among the lowest share of taxes in the nation. Yet Gov. Jennifer Granholm's plan is categorized as creating winners and losers? Instead we're told the existing "winners," particularly banks and insurance companies, should be left alone with their winnings, while promises of modest relief to manufacturers face an indefinite future. If you were a manufacturer considering new capital investment, or contemplating decisions impacting the long-term location of your operations, would Michigan be your first choice?

Granholm's Jobs and Investment Tax Act was a bold and dramatic attempt to create a more level playing field for Michigan's manufacturers and their employees, who are competing in a challenging global marketplace. Michigan's manufacturers can compete effectively and will continue to provide for Michigan's economic wealth and health, if our public officials will act before it's too late. The governor's plan is affordable, reflects good economics and demonstrates common sense. It also meets the balanced budget required by our Constitution without raising taxes on individual citizens. All our leaders need to put partisan politics aside and adopt this plan.

Bob Moodt

State Tax Manager

Herman Miller Inc.

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