Stop Punishing Michiganders for Working

By Greg McNeilly -- Chairman, Michigan Freedom Fund

With lawmakers debating competing road funding plans, tax policy is a hot topic again in Lansing.  It’s just a shame that it’s been such a one-sided discussion.

Even after the resounding defeat of Proposal 1, tax-hike fever is once-again sweeping newsrooms, editorial boards, and the state Capitol.  Refreshingly, a portion of one road funding plan unveiled last month takes a different approach—generating more revenue by letting Michiganders keep more of what they earn.   

The plan unveiled at the end of June by Senate Republicans would increase the gas tax, cut hundreds of millions in spending, and in a move that could pay huge dividends for the millions of people making their living in Michigan, it would cut the state’s income tax every year that revenue growth outpaces inflation.

According to an analysis from the non-partisan Senate Fiscal Agency, that move would have meant a $470 million tax cut for working families over just the last four years, with more savings coming each year our state economy grows.

That’s a drop in the bucket each year, considering the state raked in $8.7 billion via the income tax in 2014, but when it’s all said and done the plan could still represent one of the largest tax breaks in Michigan history. 

The best part is, it’s 100 percent pro-worker.

Unlike a sales, use, or property tax, which tax residents based on what they decide to do with their money, the income tax hits workers just for punching the time clock.

There’s an age-old and oft-proven axiom that if government wants less of something, all they have to do is tax it.  We want people to work, to provide for their families, and to make a great living, so why on Earth do we tax income in the first place? 

Going to work this morning?  Your state government is going to punish you for it. 

Putting in a few extra hours this week to catch up on bills or to put a little extra money away for your kid’s college fund?  Lansing is going to hit you with a tax on every minute you bank.

Seven other states already recognize the damage an income tax can do, and have no income tax at all, while two more have virtually no income tax. 

One recent study from noted economists Arthur Laffer and Stephen Moore analyzed 10 years of data for the 9 states with essentially no income tax and compared it to data from the 9 states in the nation with the highest tax rates.  Not surprisingly, they found states that don’t penalize residents for working outperformed their rivals in population growth, Gross State Product, employment, and in state and local tax revenue.

In other words, when governments don’t punish residents for working, families do better, economies grow, and the state Treasury sees a corresponding boost.  So if lawmakers’ goal is long-term road funding, cutting the income tax is a great first step, too.

Every penny of an income tax cut goes directly to the men and women who work so hard to make Michigan move, and not a dime goes to corporations, middle-men, or special interests—a nice switch from business-as-usual at the state Capitol.

Michigan has the best, brightest, and most dedicated workers in the world.  Lawmakers would be right to stop punishing them for working so hard.

Originally posted on The Detroit News: http://www.detroitnews.com/story/opinion/2015/07/16/mcneilly-income-taxes-punish-michiganians/30197709/.


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