Yesterday’s WSJ featured an article spotlighting the state of Michigan’s continued economic woes. Its no secret that Michigan, with the highest unemployment rate in the nation, has been struggling for a while – and in fact was mired in a “one-state recession” even while the rest of the nation was experiencing robust economic growth.
What I found striking in the article, however, were some similarities between Michigan’s situation and the one we face here in N.C.
In 2007 Governor Jennifer Granholm signed the biggest tax increase in Michigan history, with most of the $1.4 billion coming from business. The personal income tax—which hits nonincorporated small businesses—was raised to 4.2% from 3.95%, and the Michigan business tax levied a surcharge of 22%.
Government is the largest employer in the state, but the number of taxpayers to support these government workers is shrinking.
To sum the primary points of the article:
Michigan recently decided to implement a massive tax increase in excess of a billion dollars – so did North Carolina.
The tax increase included raising the income tax burden and a corporate tax surcharge – so did North Carolina’s.
Government is the largest employer in Michigan – it also is in North Carolina.
So what can NC expect in the near future?
Meanwhile, the new business taxes didn’t balance the budget. Instead, thanks to business closures and relocations, tax receipts are running nearly $1 billion below projections and the deficit has climbed back to $2.8 billion.
Following her 2007 misadventure, Ms. Granholm promised: “I’m not ever going to raise taxes again.” That pledge lasted about 18 months. Now she wants $600 million more.
Expect lower than projected tax revenue, growing budget deficits and broken tax promises (remember that most of this year’s tax increases were promised to be “temporary”)
Furthermore, as the article states, Michigan’s Governor is considering more taxes that would include a sales tax on services (also being considered in NC), a higher top personal income tax rates (similar to the income tax surcharge on top earners NC just approved), and increased taxes on cigarettes (also just passed in NC).
Is Michigan’s economy really something that NC wants to emulate?