State tax changes welcome Now help education funding

May 15, 2011
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The greater Grand Rapids business community celebrated the historic Senate passage of Gov. Rick Snyder’s tax package of sweeping changes, which most notably eliminates the Michigan Business Tax, replacing it with a flat 6 percent corporate income tax. The Senate bill will move to conference, reconciling final differences with the House-passed version.

The next big step will be legislative consideration of Snyder’s unprecedented reduction of funding for the state’s public education system, which is thought to serve largely to assure consolidations among systems around the state — a discussion long past resolution and freed of geographic boundaries.

It is imperative, however, to revisit the funding allotments, especially as reports from the House Fiscal Agency showed revenue expectations from the state taxes increased by 15.4 percent in the second quarter of the current 2010-11 fiscal year over last year. The biggest gain came from income tax collections.

The news of such gains after an almost eight-year Michigan starvation period should be as celebrated as the news from General Motors of more than 4,000 new hires. The House Fiscal Agency showed revenues for the fiscal year up 7.2 percent over last year. The revenue numbers were known to legislators well before they voted late last week, and it also serves to note that the draconian method of affecting change over more moderate effort was unnecessary.

The education funding deficits come in the wake of an ever-increasing number of voices now providing economic impact studies of education (particularly early education) as an economic driver. This was certainly apparent in Michigan as the Kalamazoo Promise put philanthropic funding to work in this regard. The Business Journal reporting on W.E. Upjohn Institute for Employment Research this week makes note of the book “Investing in Kids: Early Childhood Programs and Local Economic Development” by Upjohn researcher Timothy Bartik. The author comments: “I think economic development, properly defined, has a goal of raising per-capita earnings. Now, usually people think about doing that by directly targeting jobs through tax incentives. But you can also work on the labor-supply side of the market and increase the quantity or quality of labor supply.”

In the same week, CEOs for Cities announced a “competition to increase the number of residents with a college degree and win $1 million” called The Talent Dividend Prize, and kicked it off in Chicago at Roosevelt University. CEOs for Cities said the competition is an effort to increase college attainment in the nation’s cities by one percentage point, which it calculates will be worth $124 billion a year in increased national earnings. Further, the group refers to studies showing that 58 percent of a city’s success, as measured by per-capita income, can be attributed to the percentage of the adult population with a college degree.

This is particularly important to consider in regard to Michigan’s urban districts, including Grand Rapids Public Schools, where poverty rates skew attainment levels.

These studies and the education funding decisions are made against the backdrop of, and in contrast to, the Grand Rapids TEDx conference in Grand Rapids last week, which focused on innovators and innovative thinking. It’s a juxtaposition worth contemplating in Lansing.

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