How to Kill a State

Ok, I've had enough. I don't usually get very political, but I'm fed up. I have to vent.

Michigan, the state with the worst senator in the U.S. Senate, now adds the worst governor in the 50 states to its list.

For those of you who haven't been following Michigan politics, let me summarize the past few months for you:

1. The economy isn't that great here. Think "big 3 automakers" and you'll know why.

2. The state was facing a HUGE deficit this coming year and needed to do something about it. The classic "raise taxes" versus "cut spending" debate ensured. I think you can guess which side I was on.

3. The Governor wanted higher taxes and took the state up to (and into for a few hours) a shutdown to get what she wanted. Income taxes went up as well as some taxes on business services. And more business taxes appear to be on the way.

So here's my question: Does our governor really think that raising taxes is making Michigan MORE attractive to workers and employers? If she does, she's certainly smoking something that's probably not legal.

I had a conversation on this issue with the owner of our company the other day. depending on where the business taxes net out, he may decide to move the company to another state. The increased taxes are so much that avoiding them could pay for us to move to another state. I'm sure this isn't the outcome that our Governor is expecting, but it's the one that she'll get as the result of her actions.

Now the Governor and her supporters will argue that there's nothing left to cut/change -- that we HAD to raise taxes. Really? How about thinking creatively, Jennifer? But no, that would cost you votes among state-employed prison workers, wouldn't it?

Ok, so what's my point? Why the rant? A few reasons:

1. I hate it when any government simply solves its problems because it can raise taxes. Do people do this? No. We have to make hard choices with our finances -- cutting spending and doing without things. Why can't governments do this?

2. We're going to face this same issue nationally in less than a year. So which do we want -- higher taxes and more government services (such as health care) or lower taxes and less government involvement and spending? I would like the latter.

3. (Ok, a bit political here.) One of the biggest disappointments I've had with President Bush is his lack of fiscal control. Pull the war out of the equation -- even without it I think he would have been way over budget in most if not all of the years he's served as president. This is contrary to how he portrayed himself and contrary to the principles his party stand for. At least theoretically. I'm beginning to think that ALL politicians are simply in it for themselves. Jaded, I know, but look at the actions of these people. What else am I supposed to think?

Comments

[Money Blue Book]

I recently did a short survey to determine my political leanings...after completing it I was surprised at what I discovered. Apparently I'm a statist - a supporter of big government. One of my friends joked that I was a communist..I'm not :)

But in your example, I would probably be in favor of higher taxes with more services. I think I might be alone on this one.

-Raymond

[Les]

Better put your home-buying plans on hold until your boss makes up his mind and you decide what your next move is.

[Cory]

I couldn't agree more with this post ... governmental fiscal irresponsibility ticks me off to no end.

[Victor]

Two Words:

RON PAUL

[EasyE]

What Victor said.

RonPaul2008.com

[Jamie]

I'm really glad I got out of Michigan before things got this bad. I now live in a state that has no income tax and the state is doing so much better than Michigan. Michigan's decline in value is unfortunate for my parents and other friends because the declining property values means that most will not be able to sell their homes for even what they paid for them. I know of at least one big company that will most likely relocate to a more tax-friendly state in the next year or two, putting lots of people into the unemployment lines. But, Michigan residents are getting what they voted for by voting in politicians that have never taken a college-level course in economics. At this point, the best option might be to simply sell Michigan to Canada to offset the financial loss and lower the country's unemployment numbers by no longer counting Michigan.

[JACK]

FMF: I hear you. I met the Gove back when she was first elected. She's a smart woman, but your classic "trapped-by-ideology" person. Someone has got to wake up and realize that Michigan suffers from a massive brain drain because of how poor the economy is. I see plenty of Michigan plates here in Chicago and I'd bet the numbers are decent double digits as to how many of us grew up in Michigan or went to school there.

The real question on the political front is this: are people actually willing to vote for fiscal responsibility? Because the sad truth is that that means not supporting most major party candidates. Very few, even if they mouth the words, plan to do anything about it. When you can borrow money until the cows come home, passing the cost onto future generations, why wouldn't you if you don't have an ethical backbone?

I see a refusal to be fiscally responsible as the height of our current population's self-centeredness. It is precisely the idea of stealing candy from a baby. Only here we are stealing the wealth of our children and their children so that we can live high on the hog.

[Brad]

You're not jaded. You're a realist.

RON FREAKING PAUL.

I give him very little chance of winning a primary or election, but I give him 100% chance of shaking things up and pointing a flashlight at the jokers in both major parties. We need that at the very least.

[JACK]

Jamie: sadly many of them did take college-level courses in economics. Just that they were taught nothing more than to be a technician of a Keynesian model versus a critical thinker on economics. Don't get me started about how poor our approach to educating people in economics is since the quantitative revolution has taken hold. It almost makes me want to go back and pursue that PhD I had planned on before entering the law.

[Kevin]

FMF - I don't have much experience with Michigan other than filing one client's corporate taxes there. It is one of the most cumbersome states to deal with. They certainly do not make it easy to do business there.

[Jeremy]

My wife and I left about a year ago and we haven't looked back. We were even able to break even when we sold our house. Definitely wouldn't want to try that now...

[MikeG]

Good rant; well said. All this deficit spending is ruining our country's future. The dollar is getting more and more worthless every day. :(

And not to pile on, but Im also a Ron Paul supporter. I dont care for his social views, but he's the only guy that really wants to shake up government and cut all this rediculous spending.

[mjmcinto]

One word: Bloomberg

I know he's not running yet, but even if he doesn't I'll do a write in vote for him. While I may not always agree with him, he's first and foremost a businessman. That's what we need right now, someone to run the country as a business.

[Steve]

Bloomberg is a successful businessman. Remember W talking about being a ceo president? W was a failure in business and if it hadn't been for his father he'd be living in a van down by the river.

Rant over.

[Kevin]

I for one am a subscriber who strongly disagrees with this rant and the political views it's based on. I'd request that you stick to your usually-excellent personal finance coverage and do your political venting in some other forum.

[FMF]

Kevin --

It's ok for you to disagree, but I am writing about this issue and will continue to do so because it is a personal finance issue. Look at your expenses in any given year and taxes are going to be among the highest (if not the highest.)

[claymeadow]

fmf, as a fellow rust-belter, but a few states east, I shudder every time I read a michigan based article about giving subsidies to bio-tech companies. for those who are not aware these companies take millions in subsidies but provided very, very little in the way of jobs.

as far as politicians having a tin ear and being in it for themselves, well, why wouldn't they be; guaranteed pension, health care, and the ability to return to work after retirement as a high-paid consultant. It's a triple-dip and they know the balance of power has shifted to them and public sector employee.

[Kevin]

FMF,

Sure, taxes factor into personal finances. But I'm in the "more services" camp because I feel in the long term they are a good investment toward a stable, productive society.

Anyway I'd rather not get into a debate here. I guess since you're adamant about continuing this sort of thing I'll unsubscribe. Best regards.

[Edmund]

We need fiscal conservatives to run the government. (This is coming out of a registered Dem)

And by fiscal conservatives, I don't mean the "lower my taxes" fiscal conservatives. I feel like the term got hijacked.

My #1 issue is not with whether or not we are raising taxes. If we raise taxes to pay for spendings, or cut taxes and cut spendings, that's okay. It really ticks me off when we cut taxes and increasing spending -- the so-call fiscal insanity.

People always talk about how a certain program can benefit a lot of people. Or people talk about how a tax cut is going to help the economy. I don't care! That's not the issue here. The question is "how much does this change cost and how are you going to pay for it?"

Society Security is a great idea if it costs $1 a year. It's a horrible idea if it costs $10^38 a year. Cut the crap about how it benefits the country and tell me how much it costs first.

[Kevin]

Whew, glad that "other" Kevin is gone, he was giving me a bad name.

[FMF]

Kevin --

If that's how you feel, that's too bad. But if disagreeing with me were terms for unsubscribing, I MIGHT have two readers.

But what you read is up to you. Good luck.

[FMF]

Kevin (#2 or is it #1?) --

Ha!

[Carl Heldmann]

Great Vent! But hey, whaddya expect? Politicians are for the most part just failed lawyers.
You've gotta just love them when, having lost sight of the goal, they double their efforts.
Carl Heldmann

[Joe]

Part of the problem we're faced with, by having 2 dem senators is we're getting NO porkbarrels. Remember, every republican that supported Bush got paid for in the budget.

Remove the pork from the rest and see how well other states economies are doing.

As for the Gov & our senate?
I love 'em. Flat & simple. Check back in a couple of years. Mich will be just fine.

[Sarah]

There hasn't been a real "fiscal conservative" Republican president in many years. Bush lied to you. The major Republican candidates next year--the same. If you vote for one of them on that basis in particular, you are a sucker.

[Gab Goldenberg]

I remember you linking back to me in my early days. Happy to link to you from today's COTC :).

[Bobby]

While I agree with most of your post, I must take issue with your first point.

"I hate it when any government simply solves its problems because it can raise taxes. Do people do this? No. We have to make hard choices with our finances -- cutting spending and doing without things."

Actually, (BIG generalization coming here) Democrats USUALLY equate raising taxes with increasing revenues. People do this in the form of finding a better paying job or improving their earning potential through education, etc. So cutting spending and doing without things is not necessarily the only option.

Having said that, I believe that cutting taxes leads to job growth and increased earnings. So this current course of action, based on your rant, seems counterproductive. I guess we will see in the long run.

[FMF]

Bobby --

I'm not sure exactly what you're saying, but let me comment on what I do understand.

Yes, certainly people can raise their incomes as well, but cutting spending is usually 1) easier to do, 2) more immediate (it takes time/effort to find a new job), and 3) available to everyone (almost everyone can cut something -- not many can increase income quickly.) Therefore, the most likely course of action is cutting spending.

As far as your other poinrs, I'm not sure what you're saying so I won't comment. But generally, I'm for lower taxes and fewer government services. When the government gets involved, it seems like things get messed up and money gets wasted. I'm more in favor of private sector solutions.

Just my opinion, but it appears to me that Ron Paul is the Ross Perot of 2008. Interesting ideas (I'm a recovering libertarian myself) but just isn't gonna get elected.

On the subject of taxes, I'm sure we've all heard of the neo-Laffer curve here, right?

[rocketc]

I live in Wisconsin - the fiscal irresponsibility and high taxes are worse than Michigan.

I agree with FMF, but do most people understand that tax cuts actually increase government revenue? Tax cuts allow more people to be hired at higher wages, thus growing the tax base.

Tax increases decrease the behaviour that is taxed (i.e. homeownership, cigarette sales, etc.), make it more difficult to hire employees and decrease everyone's disposable income - the income that gets spent on good and services.

[David]

Blank, don't fall into the media's insistence that only one of the "main frontrunners" has any chance of winning.