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I’m probably the least informed person to write a post about this today but I’d like to make a short comment. Today’s decision to raise Michigan’s income tax from 3.9% to 4.35% and to impose a new sales taxes on select services makes Michigan less competitive. This decision fails to address the core budgetary crisis that the state is facing; misuse of funds.

Instead of addressing gross excessive spending on things like $100k+/year Aide’s for Granholm’s husband or (on the complete other side) the wasted spending on “picking winner” for Ethanol projects, they caved and raised taxes in ways that wouldn’t have been possible w/out the pending “Partial State Shutdown“. The shutdown today was nothing more than a political ploy to pass these increases and I believe these increases will have a negative impact on the competitiveness of Michigan.

If it is indeed our collective intent as a state, to attract and retain businesses to augment the declining auto industry, today we took a step backwards. The best way to reach our goal is by lowering or removing the income tax and taxing only consumption in the form of progressive and dynamic sales taxes. Repealing the state income tax and only taxing consumption will make Michigan much more attractive to businesses. There are other benefits to this change. (Image: Red States have no state income tax)

By removing the income tax and only taxing consumption we are able to dynamically equate the actual cost to society with the tax applied to every item and service. As an example: the consumption of gasoline creates a large intangible long term cost to society (pollution, roads, snow removal, etc) and because of this cost to society it should be taxed at an appropriate rate higher than other goods which do not carry that cost. By applying a dynamic sales tax, one that changes over time, you also get the added benefit of being able to encourage purchases of certain products. Preceding possible hurricanes in Florida (Which doesn’t have a state income tax) they will have “Hurricane Sales Tax Holidays” where residents are encourage to stock up on hurricane safety equipment without the penalty of a sales tax.

If Michigan wants to get serious about attracting new business there is only one way to do that: Low Taxes. As has been demonstrated!

If we don’t lower taxes we will not attract or retain businesses and it will make no difference what the ItCouncil, Michigan Works, MEDC, or my friends in local government do. They’ll just be polishing a turd.