Reforms vital to preserve states healthy business climate

March 28, 2011
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Gov. Rick Snyder’s proposals have sure ruffled a lot of feathers. If he wasn’t willing to confront the issues, we might as well have elected another Granholm. I may not like his proposals but maybe, with a bit of understanding, it will make what tastes like bad medicine go down with a little honey.

Taxing pensions in concept sounds unfair. People worked their entire lives to accumulate savings to cover their retirement years. People who work in government jobs or big business feel that they have a contract for their retirement and a contract to not be taxed.

The reality in the state of Michigan is that the budget is broke, and more revenue is needed. More revenue can be raised by raising taxes on business or on young families. Neither of these choices bodes well for the future of the state if it means they are driven out.

Why is retirement income any different than any other kind of income? Seniors drive on the roads, use the parks and make use of a myriad of other state services. Just because you're over 65 does not mean the services should be free.

The time for nice benefits for special people has passed. We are all in this together and must pay our fair share. It will require sacrifice on the part of our senior citizens to support the services they use. With the Michigan property tax credit, only those with a comfortable retirement will pay state income tax. Many now receive a refund of their property taxes from the Michigan property tax credit. The state can no longer afford to give back a portion of property taxes and exempt a large portion of the state’s income from income tax.

Our business tax system must be simplified. A convoluted, indecipherable tax system makes planning almost impossible. As a CPA, I should embrace complexity. But if businesses leave the state, it reduces my market. It would be nice to be able to bill businesses large amounts for a complicated tax system. Problem is, if there's no business there to do the work for them, there's no one.

Gov. Snyder wants to go to a simple income tax. That is unpopular with those who believe that Lansing should decide who prospers and who comes to the state. We want all businesses regardless of what they make. Some bureaucrat in Lansing should not be deciding the business of their choice for credits and deductions.

People are upset about raising taxes on seniors while giving tax breaks to business. There is one thing that must be understood: Without business, there are no jobs. If there are no jobs in Michigan, the unions don’t have anyone to organize, government has no one to tax, and the residents have no one to provide them with an income to feed and house their families.

A healthy business climate is essential for the health of Michigan as a whole. Government employees can go on strike and protest into infinity to no avail if there is no one to pay the taxes for their wages, pension and health care. It is what it is, and no amount of emotional rhetoric changes that fact. So if you don't want to pay taxes on your pension or give tax equity to business, you can kiss your kids and grandkids goodbye as they move to the right-to-work states in the south.

The power of financial managers to break union contracts is questionable. I am not a lawyer so I don't really understand whether the new law allows union busting or not. It has become evident that the alliance between unions and the politicians who are elected with their support, resulting in those politicians granting unsustainable benefits to union employees, can no longer be afforded. The arguments pro and con ignore one simple fact: If the money's not there, it's not there. Again, all the emotional rhetoric, strikes and threats are meaningless.

If you bargain through union influence on politicians and attain early retirement and lifetime benefits, those benefits are only as good as the ability of those not in the union to pay taxes to support them. If those taxpayers cannot find jobs or have severely reduced incomes, their ability to pay taxes will be limited.

We are all in this together. If you live in Michigan, you must support business-friendly, job-creating policies. If you think your job or benefits do not depend on a healthy job climate, you do not understand the concepts of finance. The income must equal or exceed the outflow.

The discussion of education has mainly revolved around the cost of teacher benefits. This emphasis is in the wrong place. If Michigan's tax rate was zero and there were no skilled and educated employees, no one would come here to build a business. Even in this recession, many employers are finding it difficult to find quality employees.

Every year that we graduate another class of illiterate job seekers, we create a larger burden for the future instead of assets for the future in a well-trained work force.

A lot of people don't like what Gov. Snyder is doing, generally because of the old “whose ox is being gored” concept. If you want to live in a beautiful peninsula, accept that it may be your ox that gets gored and that reality is your contribution to keeping Michigan solvent.

If taxes must be raised, then so be it. But if they pour more money into education without accountability, or waste our money on harebrained political boondoggles, then let’s throw this batch of bums out and replace them. For the first time in decades, we have responsible leadership in Lansing. We elected a businessman and CPA as governor because Michigan's problems are business and budget issues.

Paul A. Hense, CPA, is president of Hense & Associates, a local accounting firm. He also is past chairman of the National Small Business Association and the Small Business Association of Michigan.

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