I just received the latest assessment on our home from the city of Lansing.
It is down another 15%, reducing my property taxes by about $220/year. The knee-jerk reaction is "damn, that's great!". Of course it means my home is worth less than it was a year ago but, since we have no plans to move, the value shouldn't matter (unless we want to refinance or get a home-improvement loan).
Then I started thinking about the real-world implications of my little tax bonanza.
We bought our home 4 years ago, paying about 30% below SEV. Within days, I had called the city assessor and immediately had my SEV lowered by 30% (without argument).
A year later my appraised value went down another 12%. A year later, another 10% or so. And this week, it dropped another 15%.
The cumulative decline in my home's tax value from closing until now is nearly 60%, meaning my property taxes are 40% of what they would have been had the housing market not collapsed.
Good news? No way. That $1,500 or so I'm saving on taxes means significantly less money for the services I expect from local governments: police/fire, road maintenance, parks, LCC, CATA, the library, the airport, the county health department and Lansing schools.
Their costs haven't gone down 60%+. Even with major pay concessions by public workers, there's no way the various government agencies can absorb this kind of hit without significantly reducing the services I expect from them.
On top of that, our Governor has decided that he's pulling the plug on revenue sharing which takes even more money out of local government budgets.
Lansing City Council has proposed a four-mill increase in city property tax rates. Some of my conservative friends call this a tax increase. I see it as a small tax restoration. Even with the new four mills, my net property taxes are down about $1,000/year from where they started four years ago. This won't help the other governmental units that rely on property taxes, but it is a start towards protecting our quality of life.
Like the good people in East Lansing (who have already restore a portion of their property tax), I want services maintained. I don't like the idea of driving on rural Ingham County roads with no road patrols. I want snow plowed so I can get to work safely. I want potholes repaired. I want Hawk Island Park to continue as a safe, low-cost place to spend a summer afternoon. I want decent schools for our kids which means smaller class sizes, and teacher salaries that will attract the best teachers. I want the cops to show up when I call them, and I want to know that an ambulance is just minutes away if I need help.
I'd also like the downward spiral in my home to value to stop. If Lansing has to cut basic services to balance the budget, it will accelerate or extend the loss of value in our homes.
Falling home prices make us prisoners. We lose the option of moving. In my condo complex, units that once sold for up to $125,000 now go for as little as $29,000. We can't move unless we are able to absorb a huge loss.
One way to fight back is to support a modest millage that will help stop the bleeding away of our quality of life. I'll vote 'yes' on the millage, and I'll campaign for the millage.
February 28, 2011
February 26, 2011
Sending Seniors South is Stupid
One of the silliest arguments I've read in favor of taxing pensions is that Michigan would become a mecca for retirees seeking favorable tax treatment. That, apparently, is a bad idea in the mind of some editorial writer.
While Rick Snyder and his policy team at Business Leaders for Michigan argue constantly for Michigan to be a low-tax state for businesses (right now, we're right in the middle), they don't like the idea of being a low-tax state for retirees.
Kiplinger rates Michigan as one of the ten tax-friendliest states for retirees, and one of the 18 friendliest states for pensions.
So let's concede Michigan can continue to be a magnet for retirees because it doesn't tax pensions. Is that a bad thing?
Seniors are an economic plus for Michigan. They tend to consumer fewer government services, but continue to pay other taxes (notably sales and property taxes, plus Lottery games) and spend most of their income in our state:
And it could happen. When you are retired, it's a lot easier to relocate. Many already succumb to the lure of a warmer clime, especially those senior-friendly states like Georgia and Florida which offer lower taxes and higher temperatures. Drastically increasing their taxes makes those sunbelt states even more attractive to those of us who are approaching retirement.
The last thing I want to do is take my pension, guaranteed to me by the Michigan Constitution, and spend it somewhere warm. The Snyder plan makes it much more tempting.
You'd think a nerdy accountant could have figured this out.
While Rick Snyder and his policy team at Business Leaders for Michigan argue constantly for Michigan to be a low-tax state for businesses (right now, we're right in the middle), they don't like the idea of being a low-tax state for retirees.
Kiplinger rates Michigan as one of the ten tax-friendliest states for retirees, and one of the 18 friendliest states for pensions.
So let's concede Michigan can continue to be a magnet for retirees because it doesn't tax pensions. Is that a bad thing?
Seniors are an economic plus for Michigan. They tend to consumer fewer government services, but continue to pay other taxes (notably sales and property taxes, plus Lottery games) and spend most of their income in our state:
- They don't have kids in school
- Their major medical costs are covered by either insurance or Medicare
- They bring federal money (Social Security and Medicare) into the state's economy
- They are "economic givers" — they don't compete with younger folks for jobs but spend their money here
- They tend to stabilize neighborhoods by being less transient than younger people
- They generally don't create a lot of business for the police, the courts or the prison system
And it could happen. When you are retired, it's a lot easier to relocate. Many already succumb to the lure of a warmer clime, especially those senior-friendly states like Georgia and Florida which offer lower taxes and higher temperatures. Drastically increasing their taxes makes those sunbelt states even more attractive to those of us who are approaching retirement.
The last thing I want to do is take my pension, guaranteed to me by the Michigan Constitution, and spend it somewhere warm. The Snyder plan makes it much more tempting.
You'd think a nerdy accountant could have figured this out.
February 25, 2011
You Can't Override Reality with Ideology
I really admire people of conviction, even when they disagree with me. Folks like Congressmen Dennis Kucinich and Ron Paul are amazing people.
I dislike with equal fervor people whose values are based on the most recent polling data. The name John McCain immediately comes to mind.
But I’ve found that sometimes rigid ideology butts heads with reality. That’s when I move towards the latter.
I’m one of those who believes controlled substances should be legalized, regulated and taxed. Alcohol and nicotine cost our society far more in terms of healthcare, crime and human angst than any other drugs, yet they are legal because Prohibition does not work. Yet marijuana, the drug of choice for several generations, can get you an all-expenses-paid vacation at the Jackson Graybar Hilton.
As Mr. Spock would say, that is not logical. Or consistent.
I’m also of a mind to rid our society of handguns. All the data tells me we’d be safer without them. (There goes any future political career!). To me, the Second Amendment is about muzzle-loaders and the National Guard, not the right to have an armory in my basement.
But my ideology doesn’t fit reality.
My ideology simply is not practical at a state level. Anything short of national legalization of drugs would lead to cross-border insanity; the idea that we could actually clear out all the handguns even as a national priority is Utopian. (We have as many guns as we have people.)
That brings us to Governor Snyder’s desire to end state tax incentives and other bribes to bring targeted industries into the state. His argument – that state incentives constitute an unwarranted intrusion into what should be a free market –has some merit. In a perfect world, I’d agree with him.
The problem is that is totally unrealistic, just as Michigan can’t unilaterally ban handguns or legalize marijuana. We are in a global economy, competing not just with other states but with many nations.
The Governor’s call to end state subsidies to prime the pump for a battery industry may be ideologically consistent, but it is totally unrealistic and potentially horrific policy. We are competing with the world to be a center for one of the most critical technologies of the 21st century. South Korea and China have made batteries a national priority. The governments of those countries provide massive subsidies to nurture the new technology. As a result South Korea and China have a virtual monopoly on production.
Many states are battling as well to be home of the battery industry. We had a head start thanks to 1) the domestic manufacturing hub in metro Detroit, and 2) some vision on the part of the Granholm administration. It appears Gov. Snyder wants to piss away that early lead by moving to a laissez faire economic policy.
Relying on the “free market” to promote the industry in Michigan is recklessly unrealistic. The same holds true for the renewable energy industry where we are competing with one fiscal hand tied behind our backs.
When ideology trumps reality, we are in deep trouble. We need reality-based policy.
Rick Snyder is trained as an accountant, a profession based on numbers (reality) rather than ideology or “truthiness”. His views on state tax incentives may be ideologically consistent, but they defy reality.
It’s time for the Governor to “get real.”
I dislike with equal fervor people whose values are based on the most recent polling data. The name John McCain immediately comes to mind.
But I’ve found that sometimes rigid ideology butts heads with reality. That’s when I move towards the latter.
I’m one of those who believes controlled substances should be legalized, regulated and taxed. Alcohol and nicotine cost our society far more in terms of healthcare, crime and human angst than any other drugs, yet they are legal because Prohibition does not work. Yet marijuana, the drug of choice for several generations, can get you an all-expenses-paid vacation at the Jackson Graybar Hilton.
As Mr. Spock would say, that is not logical. Or consistent.
I’m also of a mind to rid our society of handguns. All the data tells me we’d be safer without them. (There goes any future political career!). To me, the Second Amendment is about muzzle-loaders and the National Guard, not the right to have an armory in my basement.
But my ideology doesn’t fit reality.
My ideology simply is not practical at a state level. Anything short of national legalization of drugs would lead to cross-border insanity; the idea that we could actually clear out all the handguns even as a national priority is Utopian. (We have as many guns as we have people.)
That brings us to Governor Snyder’s desire to end state tax incentives and other bribes to bring targeted industries into the state. His argument – that state incentives constitute an unwarranted intrusion into what should be a free market –has some merit. In a perfect world, I’d agree with him.
The problem is that is totally unrealistic, just as Michigan can’t unilaterally ban handguns or legalize marijuana. We are in a global economy, competing not just with other states but with many nations.
The Governor’s call to end state subsidies to prime the pump for a battery industry may be ideologically consistent, but it is totally unrealistic and potentially horrific policy. We are competing with the world to be a center for one of the most critical technologies of the 21st century. South Korea and China have made batteries a national priority. The governments of those countries provide massive subsidies to nurture the new technology. As a result South Korea and China have a virtual monopoly on production.
Many states are battling as well to be home of the battery industry. We had a head start thanks to 1) the domestic manufacturing hub in metro Detroit, and 2) some vision on the part of the Granholm administration. It appears Gov. Snyder wants to piss away that early lead by moving to a laissez faire economic policy.
Relying on the “free market” to promote the industry in Michigan is recklessly unrealistic. The same holds true for the renewable energy industry where we are competing with one fiscal hand tied behind our backs.
When ideology trumps reality, we are in deep trouble. We need reality-based policy.
Rick Snyder is trained as an accountant, a profession based on numbers (reality) rather than ideology or “truthiness”. His views on state tax incentives may be ideologically consistent, but they defy reality.
It’s time for the Governor to “get real.”
February 24, 2011
Lessons Learned from Bill Collectors
Chad was getting worn out.
Working 40 hours/week was more than he wanted to handle, so he cut back to just 30 days/week. It cut his income by 25%, but he was OK with that because his priorities were elsewhere.
But then, the letters and phone calls started. He wasn't able to meet his financial commitments. The bill collectors were all over him.
First it was his insurance carrier, then his cellphone company, then his mortgage holder. They all wanted him to pay them what he had promised to pay. Chad told them all the same thing: "My income has gone down, and I simply don't have the money to pay you. You will have to accept less from me" with the tacit assumption that they would continue to provide him with the same services.
When the collection agents probed a little, they discovered that Chad had voluntarily cut his income. He chose to have less income, so they weren't in a mood to adjust his bills. In fact, they became more insistent.
What Chad really wanted was to renege on agreements he had made. The result was inevitable: his homeowners and car insurance was cancelled, his cellphone was turned off (but he kept running up a bill), and he found a foreclosure notice taped to his front door.
When his insurance was cancelled, his car loan and mortgage were automatically in default. Even though his cell service was cancelled, he faced either continued accrued service charges or a $250 early cancellation fee. The complications from his decision to reduce his income escalated.
Chad found that other businesses wouldn't extend him credit because he had developed a reputation of someone who didn't keep his financial commitments. His creditors took him to court. He faced a choice: restore his income to its previous level, or file for bankruptcy.
Chad could have been the model for Gov. Rick Snyder's approach to state government: voluntarily cut your income, plead poverty, and tell your folks you were reneging on commitments made to them.
"Voluntarily cutting state income?" you ask. Yes, and I'm not just talking about Gov. Snyder's $1.5 billion proposed gift to Michigan businesses. It goes back more than a decade.
Michigan's current financial crisis is solely not the result of the international recession, or even the collapse of the domestic auto industry. The "perfect storm" of economic chaos gutted income tax, sales tax and business tax revenues.
But state tax policies enacted during the Engler administration made it far worse. As a state we tried to cut our way to prosperity. We bought into the argument that cutting taxes was the pain-free path to wealth.
According to the non-partisan Senate Fiscal Agency, the state has been on a tax-cutting binge for a decade.
"What?" you say. "I don't believe taxes are lower than they were under John Engler."
But it's true. The rates may not be lower, but the effective rate (what we actually pay) is down 25%. (They measure effective taxes as the percentage of personal income paid in taxes.) In 2000, you would have paid about $95 for every $1,000 of income. A decade later, it was about $70 for every $1,000.
Much of the reduction has been through "tax expenditures" (tax breaks for various interest groups).
If Michigan's EFFECTIVE TAX rate had held constant from the Engler years, the state would be collecting an additional $8 billion.
Rather than recognize that more than a decade of tax-cutting hasn't brought prosperity to Michigan, the Snyder administration proposes to
1) Cut taxes even more for businesses, and
2) Plead poverty and renege on longstanding financial commitments made to seniors, local governments, public employees, children and college students.
When Gov. Snyder says "we no longer can afford" things like revenue sharing, what he is really saying is "we have decided that we'd rather continue to cut taxes than meet our commitments. When we made those promises, we had our fingers crossed."
I don't propose fully restoring Michigan's tax rates to collect the full $8 billion, although that kind of money would allow the state to again "walk the walk" on things like education. What I do propose is
Working 40 hours/week was more than he wanted to handle, so he cut back to just 30 days/week. It cut his income by 25%, but he was OK with that because his priorities were elsewhere.
But then, the letters and phone calls started. He wasn't able to meet his financial commitments. The bill collectors were all over him.
First it was his insurance carrier, then his cellphone company, then his mortgage holder. They all wanted him to pay them what he had promised to pay. Chad told them all the same thing: "My income has gone down, and I simply don't have the money to pay you. You will have to accept less from me" with the tacit assumption that they would continue to provide him with the same services.
When the collection agents probed a little, they discovered that Chad had voluntarily cut his income. He chose to have less income, so they weren't in a mood to adjust his bills. In fact, they became more insistent.
What Chad really wanted was to renege on agreements he had made. The result was inevitable: his homeowners and car insurance was cancelled, his cellphone was turned off (but he kept running up a bill), and he found a foreclosure notice taped to his front door.
When his insurance was cancelled, his car loan and mortgage were automatically in default. Even though his cell service was cancelled, he faced either continued accrued service charges or a $250 early cancellation fee. The complications from his decision to reduce his income escalated.
Chad found that other businesses wouldn't extend him credit because he had developed a reputation of someone who didn't keep his financial commitments. His creditors took him to court. He faced a choice: restore his income to its previous level, or file for bankruptcy.
Chad could have been the model for Gov. Rick Snyder's approach to state government: voluntarily cut your income, plead poverty, and tell your folks you were reneging on commitments made to them.
"Voluntarily cutting state income?" you ask. Yes, and I'm not just talking about Gov. Snyder's $1.5 billion proposed gift to Michigan businesses. It goes back more than a decade.
Michigan's current financial crisis is solely not the result of the international recession, or even the collapse of the domestic auto industry. The "perfect storm" of economic chaos gutted income tax, sales tax and business tax revenues.
But state tax policies enacted during the Engler administration made it far worse. As a state we tried to cut our way to prosperity. We bought into the argument that cutting taxes was the pain-free path to wealth.
According to the non-partisan Senate Fiscal Agency, the state has been on a tax-cutting binge for a decade.
"What?" you say. "I don't believe taxes are lower than they were under John Engler."
But it's true. The rates may not be lower, but the effective rate (what we actually pay) is down 25%. (They measure effective taxes as the percentage of personal income paid in taxes.) In 2000, you would have paid about $95 for every $1,000 of income. A decade later, it was about $70 for every $1,000.
Much of the reduction has been through "tax expenditures" (tax breaks for various interest groups).
If Michigan's EFFECTIVE TAX rate had held constant from the Engler years, the state would be collecting an additional $8 billion.
Rather than recognize that more than a decade of tax-cutting hasn't brought prosperity to Michigan, the Snyder administration proposes to
1) Cut taxes even more for businesses, and
2) Plead poverty and renege on longstanding financial commitments made to seniors, local governments, public employees, children and college students.
When Gov. Snyder says "we no longer can afford" things like revenue sharing, what he is really saying is "we have decided that we'd rather continue to cut taxes than meet our commitments. When we made those promises, we had our fingers crossed."
I don't propose fully restoring Michigan's tax rates to collect the full $8 billion, although that kind of money would allow the state to again "walk the walk" on things like education. What I do propose is
- Expand the sales tax to cover all end-user services, and cut the rate to 5.5%
- Raise the ridiculously low tax on beer
- Extend the sales tax to vending machine sales
- Do a complete review of tax expenditures, repealing those which don't work or are outdated
February 23, 2011
Not All Problems Solved in 42 Minutes
Tim Nester made some good points this week on his TalkLansing.net radio program.
Tim pointed out that success in a strategy requires patience. The Chinese have a long-term plan for economic success, and they stick with it even when things get a little rough.
Tom Izzo, Suzie Merchant and Mark Dantonio have long-term strategies for success for their teams. They stick with it, even if it means throwing excellent players off their teams because the have failed to meet team standards.
But in politics, we don't have any patience. We want instant solutions to problems regardless of the size of the problem, and regardless of who has the true power to resolve the problem.
And we want solutions that are painless.
I call it "TV Drama Syndrome" because most television has trained us to believe that all issues can be resolved in 42 minutes plus commercials – the length of an episode of a drama show. Problem, investigation, complications and solutions in an hour. With sitcoms is a half-hour from problem to solution. It's that simple.
In Washington, Barack Obama had about 6 months to clean up the huge economic mess left behind by George W. Bush (recently ranked the 5th worst president in our history).
Turning around an economy is like reversing the course of an aircraft carrier: you can't turn it on a dime. It has been a challenge that even Aaron Sorkin couldn't solve in one hour of prime time TV.
So Obama's opponents start complaining that his economic program wasn't working even before it was enacted. (Republicans announced their intention to fight everything he proposed before the inauguration so, for them, failure was the only option.)
The facts show the stimulus program has worked, preventing the loss of an additional 2-to-3 million jobs, significantly increasing the GDP, restoring confidence on Wall Street.
Republicans, who wanted the program to fail so they could win in 2010 elections, immediately labeled the stimulus program a "failure". They ginned up the ridiculous concept that the stimulus could only be considered a success if unemployment dropped to 5% immediately.
They hope to gut the Affordable Healthcare Act by tanking by withholding funding for implementation. They will cripple it just enough so it doesn't do enough to reform our healthcare system, and then claim the original plan was at fault when the reality will be the half-assed implementation demanded by Republicans.
My conclusions:
1. We need to give big plans time to work. The Obama economic plan and healthcare plan should be given time to work before the opposition starts chipping away at it.
2. As Americans, we've got to stop falling for the the demagogues who tell us it's always someone else at fault (e.g., public employees, school teachers, unions) and take some personal responsibility.
3. As Americans, we should demand that we back off the Republican drive to give complete functional control of government to business leaders, the brilliant visionaries who gave us things like the Wall Street meltdown, oil-flavored Gulf of Mexico seafood and $39 overdraft fees. Making rich people even richer is not a formula for building a strong middle class.
Above all, we need to recognize that not all problems will be solved in 42 minutes (plus commercials).
Tim pointed out that success in a strategy requires patience. The Chinese have a long-term plan for economic success, and they stick with it even when things get a little rough.
Tom Izzo, Suzie Merchant and Mark Dantonio have long-term strategies for success for their teams. They stick with it, even if it means throwing excellent players off their teams because the have failed to meet team standards.
But in politics, we don't have any patience. We want instant solutions to problems regardless of the size of the problem, and regardless of who has the true power to resolve the problem.
And we want solutions that are painless.
I call it "TV Drama Syndrome" because most television has trained us to believe that all issues can be resolved in 42 minutes plus commercials – the length of an episode of a drama show. Problem, investigation, complications and solutions in an hour. With sitcoms is a half-hour from problem to solution. It's that simple.
In Washington, Barack Obama had about 6 months to clean up the huge economic mess left behind by George W. Bush (recently ranked the 5th worst president in our history).
Turning around an economy is like reversing the course of an aircraft carrier: you can't turn it on a dime. It has been a challenge that even Aaron Sorkin couldn't solve in one hour of prime time TV.
So Obama's opponents start complaining that his economic program wasn't working even before it was enacted. (Republicans announced their intention to fight everything he proposed before the inauguration so, for them, failure was the only option.)
The facts show the stimulus program has worked, preventing the loss of an additional 2-to-3 million jobs, significantly increasing the GDP, restoring confidence on Wall Street.
Republicans, who wanted the program to fail so they could win in 2010 elections, immediately labeled the stimulus program a "failure". They ginned up the ridiculous concept that the stimulus could only be considered a success if unemployment dropped to 5% immediately.
They hope to gut the Affordable Healthcare Act by tanking by withholding funding for implementation. They will cripple it just enough so it doesn't do enough to reform our healthcare system, and then claim the original plan was at fault when the reality will be the half-assed implementation demanded by Republicans.
My conclusions:
1. We need to give big plans time to work. The Obama economic plan and healthcare plan should be given time to work before the opposition starts chipping away at it.
2. As Americans, we've got to stop falling for the the demagogues who tell us it's always someone else at fault (e.g., public employees, school teachers, unions) and take some personal responsibility.
3. As Americans, we should demand that we back off the Republican drive to give complete functional control of government to business leaders, the brilliant visionaries who gave us things like the Wall Street meltdown, oil-flavored Gulf of Mexico seafood and $39 overdraft fees. Making rich people even richer is not a formula for building a strong middle class.
Above all, we need to recognize that not all problems will be solved in 42 minutes (plus commercials).
February 22, 2011
Businesses Don't Create Jobs
The folks at the Michigan Chamber of Commerce are a little like Rudy "9-11" Guiliani. Most of their policy statements consist of "Noun, Verb, Job-Providers". Their argument for shifting business costs to the rest of us consists, basically, of the concept that businesses exist to create jobs.
Hooey. Double Hooey.
Businesses exist to make the largest profits possible for their owners. If that means hiring people, they hire. If that means laying people off, they lay them off. If that means shifting production to another country, they outsource.
Businesses, by and large, have no social conscience. They aren't supposed to have a conscience (even though the activist Supreme Court says companies are really people). They are created to generate profits for their owners. Period.
Government doesn't create jobs either, but at least it is supposed to have a conscience. In a democratic society, government has a responsibility to all of us. Unlike a business, it isn't designed to operate as a profit-generating machine. Its job is to help all of its people live a more profitable life.
What creates jobs are customers. All the tax breaks to business in the world won't create a single job without increased demand for services or products. (In fact, many tax breaks reward companies for eliminating jobs: tax credits for investment into robots is just one of many examples.)
The mantra of the corporate representatives in government is that freeing up more capital for business through lower taxes, regulation etc. will allow them to create jobs. Then why do we have a combination of a booming stock market, record corporate profits, record executive bonuses, trillions in liquid corporate assets sitting in the bank ... and sky-high unemployment?
The auto industry has recovered because people started buying cars. To do that, it's PEOPLE who need more money. If PEOPLE are buying, companies will find the money to meet the demand. Only at that point companies will 1) add more employees, and 2) start buying from suppliers.
Government policy, therefore, needs to maximize the money available to those who drive economic growth: consumers of services and products.
So what does Rick Snyder do? He calls for an end to taxation for most businesses, but pays for it by taking money out of the pockets of their potential customers. Compounding the mistake, he focuses his tax increases on those most likely to spend money quickly: lower- and middle-income families. His budget takes money away from seniors, college students, government employees and the working poor. Is it going to help sales at the Mom-and-Pop convenience store when many of their customers have less money to spend?
This strategy may give businesses better return on their current sales by reducing costs, but it won't create jobs.
Making things even worse: to finance higher profits for the economic elite, they mortgage the future. Economist Paul Krugman calls it "Eating the Future".
Hooey. Double Hooey.
Businesses exist to make the largest profits possible for their owners. If that means hiring people, they hire. If that means laying people off, they lay them off. If that means shifting production to another country, they outsource.
Businesses, by and large, have no social conscience. They aren't supposed to have a conscience (even though the activist Supreme Court says companies are really people). They are created to generate profits for their owners. Period.
Government doesn't create jobs either, but at least it is supposed to have a conscience. In a democratic society, government has a responsibility to all of us. Unlike a business, it isn't designed to operate as a profit-generating machine. Its job is to help all of its people live a more profitable life.
What creates jobs are customers. All the tax breaks to business in the world won't create a single job without increased demand for services or products. (In fact, many tax breaks reward companies for eliminating jobs: tax credits for investment into robots is just one of many examples.)
The mantra of the corporate representatives in government is that freeing up more capital for business through lower taxes, regulation etc. will allow them to create jobs. Then why do we have a combination of a booming stock market, record corporate profits, record executive bonuses, trillions in liquid corporate assets sitting in the bank ... and sky-high unemployment?
The auto industry has recovered because people started buying cars. To do that, it's PEOPLE who need more money. If PEOPLE are buying, companies will find the money to meet the demand. Only at that point companies will 1) add more employees, and 2) start buying from suppliers.
Government policy, therefore, needs to maximize the money available to those who drive economic growth: consumers of services and products.
So what does Rick Snyder do? He calls for an end to taxation for most businesses, but pays for it by taking money out of the pockets of their potential customers. Compounding the mistake, he focuses his tax increases on those most likely to spend money quickly: lower- and middle-income families. His budget takes money away from seniors, college students, government employees and the working poor. Is it going to help sales at the Mom-and-Pop convenience store when many of their customers have less money to spend?
This strategy may give businesses better return on their current sales by reducing costs, but it won't create jobs.
Making things even worse: to finance higher profits for the economic elite, they mortgage the future. Economist Paul Krugman calls it "Eating the Future".
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