why the new state tax rules will have no effect, other than harming poor people. oh, and old people.

That’s a mouthful, but whatever. More importantly, the new Michigan state tax rules going into effect in this month just plain suck. A lot. Governor Snyder and the Republican Senate pushed through tax reforms that will do a few things:

  1. Most Michigan companies will see a lower tax or no tax in 2012.
  2. Low income workers will see cuts of up to 70% in EITC (Earned Income Tax Credit).
  3. Retirees with pensions will now see their pensions taxed.

My response is two-fold. First, the low-hanging fruit: another misleading headline! This article is entitled “New State Tax Rules Good For Business.” Well, actually, according to the report cited in the same (SAME) article, the headline is refuted. The article cites nonpartisan Citizens Research Council, an objective Michigan think tank that publishes reports on issues pertinent to Michigan policymakers. Oh, and they’ve been at it for 90 years:

“The nonpartisan Citizens Research Council concluded in a July report that the business tax cut likely will have a positive effect on business investment and Michigan’s reputation in the business community. But it sees potential pitfalls as individuals pick up the tab through higher income tax payments, reducing their ability to spend in ways that would spur the economy.

“Because of the offsetting nature of these effects, any overall effect on growth, positive or negative, is likely to be small,” the report concluded.”

For some reason, the outcome of this tax reform, that consumers will have less to spend and will offset any business tax cuts to have NO EFFECT, is buried in the article and missing from the headline.

Media responsibility aside, what’s more is that this vital point is also buried in the policy debate. Citizens whose public sector jobs are gone or whose pensions are now taxed have that much less money in their pockets with which they can buy the goods and services that these businesses produce. Not only is the outcome problematic, essentially encouraging no growth in Michigan’s economy, but these tax cuts are unnecessarily unfair, in some cases downright cruel, to the middle class. In order to give businesses tax cuts, Michigan citizens will see their tax credits lowered from approximately $400 to $100. Retirees will now pay taxes on pensions they thought they could count on being untaxed. Talk about uncertainty, Republicans!

The whole idea that cutting taxes on businesses will lead them to hire more is incredibly wrong, misleading, failed, and plain unfair.



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