Michigan's budget woes -- what would you do?

[Uncle Mxy]

Despite all manner of hijinkery, the budget will be badly out of balance for FY 2008.

About half of that imbalance results from business tax laws expiring with no replacement. That's one thing. But even if you replaced all the business tax revenue and then some with a new tax structure, there's still a big imbalance.

Granholm's proposed a new "services" tax.

Lots of people have bitched.

Of those that have bitched, most of them don't suggest any alternatives, afraid they won't pass the "laugh" test and|or will seriously piss off some constituency or other. DeVos tried that shit and was defeated. The state Senate majority leader Bishop has been trying that same shit and really hasn't gotten his way on much, thus far.

Of those who have proposed alternatives, most don't comprehend that the bulk of a state's spending dollars comes from the federal government, with strings (more like titanium cables) attached. Money we get from the federal government for, say, road repair can only be spent on road repair and not diverted to other functions. The state has a $40-odd billion budget, but $30+ million of that comes from the federal government, which is why a billion or two is a big deal. (Note that we are a donor state, paying more in taxes to the federal government than we get back from them in services.)

No one that I'm aware of has seriously suggested getting rid of Michigan's balanced budget amendment. "Borrow now, pay later" voodoo like, say, Reaganomics don't work with a balanced budget. The state's most recent windfall came in the form of tobacco settlement $, most of which is going to college education (scholarships for HS graduates), some of which went to economic stimulus (MEDC). Is there a better use, or better way to deploy that? There's no obvious windfall on the horizon.

No one that I'm aware of has seriously suggested significantly jacking up currently-existing business taxes, enough to cover the imbalance. It may not even be possible to bump business taxes up enough to cover that, realistically speaking. You can't just double taxes and get double the revenue, as businesses will leave and fold.

Do people agree with and understand the above?

What would you do to fix Michigan's budget woes?

[WTFchris]

Shit, if I knew what to do I'd be running for office.

All I know is I agree with you on the taxes. The point of getting rid of the SBT was to make it more enticing for businesses here. The solution of jacking up taxes on other shit only makes the tax base poorer and eventually makes them leave. It's a short term fix that will cause an even bigger problem down the road IMO. I really don't have any answers I hate to say.

I don't think the services tax will work because most people I know are just like me. Once things become more than you want to spend, you cut back on those services. Instead of going to a movie you wait a couple weeks for the dollar show. Or you wash your car at home instead of taking it somewhere. You might go to a few less ball games, or sit in cheaper seats. When prices go up, people spend the same amount on those services (by doing them less frequently). So while the state might make money off those things, businesses will lose money from reduced spending. It's essentially the state taxing the business.

[Zip Goshboots]

^^^Good point on taxes Chris.
Last year in Omaha, when the gas hit three bucks a gallon, people conserved. They conserved so well that after about three months the state had to raise the gas tax a penny to make up from the revenue shortfall that the conserving of gas created! Ain't that some shit. People got smart and then got slapped upside the haid for it.
That's one of those taxing conundrums that won;t work. Tax the services, and a whole lot more people become less lazy in a hurry.

[WTFchris]

Imagine if they put a 50 cent tax on fast food orders. Doesn't seem like a whole lot, but I bet people simply stop buying them as often. Eventually they conserve (like you said) to the point that it kills the business itself. While McDonald's probably wouldn't go down the crapper, the mom and pop restaurants will.

[Zip Goshboots]

I agree again. I forgot to add that after the state raised the gas tax, people conserved more because that pissed them off and it went up another penny six months later.
Nebraska instituted one of those "service taxes", and guys with lawn services and such had to add tax onto their prices. They simply adjusted their prices down so they could keep the prices about the same (for instance, instead of charging $25 plus tax, they charged, say, 23 and added the tax to keep it at 25), and the tax they thought it would generate was short of predictions. OOPS!

[Big Swami]

I really don't know how to fix Michigan. All I can do is identify the problems, which are many.

1. Michigan is handing over its abundant natural resources to be shat upon by the highest bidder.

2. For some reason, when a political gadfly has proven that they don't know shit and can't do shit, they end up managing a school district somehow. Our schools have suffered BADLY due to poor management. Add that to the typical Republican "make the government so small you could drown it in a bathtub"* attitude, and you have completely ineffective public schools. Completely ineffective schools means kids who are not confident enough to succeed in college. And even those kids who succeed in college have to struggle. At what point do you just say, "fuck this, it's not worth it"?

3. The goddamn corruption is out of control. It happens on every level, from the guy who uses his travel budget to send his family on vacation, to the county commission guy who votes to award road work contracts based on the kickback he'll receive, to the Legislature who cares not to spend time listening to anyone who won't line their pockets. The "system" (too generous a word) does not care about you. It does not work for you, unless you can somehow align your interests with a gigantic corporation.

4. Bring back manufacturing. You can only trust a civilized nation to manufacture safe and strong products. This whole "service economy" thing is utter bullshit and we all know it.


* Actual quote.

[Uncle Mxy]

The point of getting rid of the SBT was to make it more enticing for businesses here.

No, it was to encourage the replacement of the SBT with a better tax model. The SBT had two key design points that are no longer a factor: moneymaking automakers, and small businesses preparing taxes by hand. As those factors stopped being true, the SBT devolved into a big mess over time, and needs modernization and streamlining. Note that we've had many businesses leave despite waiving the SBT for them, so it's far from the only issue.

As far as people cutting back as a result of a tax, it really depends on how price sensitive the customers and services are. It took a BIG swing in gas prices before people became sensitive enough to them to cut their driving, rather than drive an extra 10 miles to save maybe a nickel/gallon at the el cheapo gas station. I could believe that, say, a ticket price tax might make people do a little bit more price shopping and weed out the gougers without cutting down overall consumption.

Imagine if they put a 50 cent tax on fast food orders. Doesn't seem like a whole lot, but I bet people simply stop buying them as often. Eventually they conserve (like you said) to the point that it kills the business itself. While McDonald's probably wouldn't go down the crapper, the mom and pop restaurants will.

How many mom-and-pop "fast food" places are there? Aren't they dead? I don't count those hot dogs at a gas station as "fast food" (fuck, I don't even count them as food).

Michigan is handing over its abundant natural resources to be shat upon by the highest bidder.

Do you think there's a way to better monetize that to make the budget work? I dunno. Our biggest natural resource is clearly shared with other states and Canada, so we're only really as strong as the weakest link.

Fixing the schools? I guess the question I have is -- how much does the state spend on schools, and how much should it spend? Schools get a lot of unfunded and underfunded mandates (e.g. NCLB, special ed) which make the comparisons with "the good ol' days" difficult. I wouldn't consider Michigan's schools problem strictly as a Republican issue. Detroit schools have been a giant clusterfuck run under multiple different groups of Democrats.

[WTFchris]

How many mom-and-pop "fast food" places are there? Aren't they dead? I don't count those hot dogs at a gas station as "fast food" (fuck, I don't even count them as food).

I'm talking restuarants in general. Like the coney shops, sandwhich places, etc. Heck, even chains will suffer. When the prices go up, people cook at home more. Sure, there is an amount that starts that...and I'm not sure the tax would be enough to cause that. Some people will simply stop going to those things out of anger or spite, regardless of the amount of cost. Most probably won't change any habits. Look at smokers still paying those taxes. However, what happens when the tax isn't enough? Make it more? Find another source? Eventually it reaches the cut off amount (unknown amount) where people get pissed off and stop spending on those services. The question is whether we'll get there.

And like Zip said. The business often ends up just eating the cost themselves to keep their prices. That cuts into their profits and ultimately hurts small businesses in general.

[b-diddy]

anyone know a link to the state budget? maybe to past state budgets also? hard to really say how to fix it without knowing the problems. not sure about the state, but atleast the city of detroit has exhorbitant taxes, for seemingly not much in return. is detroit bringing down the whole state? i do believe alot, but not all, of our problems could be solved with more effective gov. freeman hendrix mentioned in his campaign for mayor that the overhead for detroit schools was something like 27 cents of every dollar. florida used to be that way, and then they got it down to something like 6. whats the saying "the beuracracy is expanding to meet the expanding needs of the beucracy"? something like that. definitly detroit's problem, and my guess the state's too.

seems to me we need alot of help from the fed. things like universal health care would be a great start. discouraging outsourcing would be good too. why not gamble on flex fuels? we've got a ton of space, definitly the labor force, and a leading agricultural school. its not like we've got anything better on the horrizon.

[Fool]

http://www.senate.michigan.gov/sfa/

http://www.senate.michigan.gov/sfa/P...tlookJan07.pdf