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June 13, 2008


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One of my favorite bloggers is a techie stuck in Michigan because his kids are there. If that weren't the case, he'd be leaving town.

Some places, like California (unfortunately, since I live there) can get away with high taxes because they have other things that attract people and investment (highly educated workforce, convenient transit, good weather, large ethnic communities, etc). A place like Michigan can't; nobody in their right mind would ever start a potentially large business in Michigan if they had a choice in the matter. And business startups is where jobs come from nowadays, not from dying unionized outfits like GM.

Sadly, there is a pattern in these places:

o The state starts out with an industrial, unionized workforce
o Populist politicians get elected. Political machines get entrenched.
o They tax the heck out of the companies.
o The companies leave or die. Tax revenue goes down.
o Politicians, seeking revenue and government jobs, raise more taxes and look for pork
o More people leave, especially anyone entrepreneurial.
o Eventually, you have a dead area with everyone working for the government, and a few
mom&pop shops selling bagels to government workers.
o The end result is the government itself starts buckling under its own weight as the
population collapses.

The only thing that can save this is government turnover and sensible citizens who ignore the populist nonsense of the machine politicians.

Upstate NY already went this route. California also has this to an alarming degree, although it can get away with it longer than others. Michigan appears to be going this way too...

(One aside: by "convenient transit", I meant overseas shipping and railroads, not individual transit...)

More reason for ALL of us in Michigan to work to get the Michigan Fair Tax proposal on the ballot this November!

When will US voters learn the consequences of high taxes?

While I personally agree with this premise, I cannot trust WSJ articles as much as I used to with a psychotic running the operation now. :-/

Even scarier... Check out her qualifications:,1607,7-168--57920--,00.html

"Jennifer Granholm was born in Vancouver, British Columbia, and is an honors graduate of both the University of California at Berkeley and Harvard Law School. She serves as the Policy Chair of the Democratic Governors Association and is chair of the Economic Development and Commerce Committee of the National Governors Association."

She is chairs the Economic Development and Commerce Committee and has degrees from two of America's top universities and still fails to understand economics. So I suppose that it should come as no surprise that Americans (and members of congress) want a windfall profits tax on oil production. High prices are caused by low supply or high demand (or both). Taxing production of the item you need more of does not help. It will hurt. If you needed more apples, would you add an extra tax on apple farms? It sounds like Granholm would.

Obviously, Granholm was an affirmative action admit. :-)

Granholm is a joke... and people thought Engler was bad. She is absolutely clueless when it comes to the economy.

As much as I love the state, as soon as my wife is able to transfer her bar license to another reciprocal state, we're out of here.

Excellent article, blog, and write up (How to Kill a State, November 16, 2007)! You've articulated very well my position with regard to government budgeting / spending and the current administration.
It's unfortunate for your state that it's become a great example of the long-term cost of short-term thinking. It takes hard work, discipline, and sacrifice to cut costs and the rewards are not always immediately evident. However, such financial discipline is necessary to sustain a healthy economy.
If only the federal government would now look to Michigan as a failed experiment in tax and spend and amend their ways before it's too late...

I left Michigan 23 years ago. I do love the state, but even back then, I could tell what the probable future looked like.

The problem starts with the big 3, and their in-ability to get visionaries to take over the business. Ford lately makes a horrible example here. After years of good times, money pouring in, does Ford invest in small to medium cars - heck no, it pours all of the investment money back into the SUV market. It drops the Taurus nameplate - one that it invested decades in building up. I was in Dearborn, working at the gas turbine lab, when they put the new Taurus on the lawn, to show the next new thing coming. The moral I took from this story - if you see a technology company taken over by an accountant, or 'businessman', run. (For a similar horrible example, Apple without Steve Jobs).

And there are what, between 4 and 6 jobs dependent on the jobs of those in the big 3. Multiplier effect really hurts in reverse.

Then there is the pit of corruption called Detroit. I grew up there, went to school with the son of one of the long time city councilmen, who was a good man. Detroit should be an amazing asset to the State of Michigan. Instead, its a pit.

Suffice to say, I saw what was likely to happen over 20 years ago. My family stayed, to their cost.

I often think about trying to find a cottage around Petoskey, or Marquette or Houghton-Hancock. Took my family on a trip up to Petoskey last year. Sure was different than what I remember from the 70's. I don't think I can do it. I could afford it, but I don't think I want to put much at risk in a state that I believe to be so financially and politically badly off.

I might change my mind, if the people of the state would vote in a republican administration that was responsible, and actually conservative (GWB and AS and heck, any of this years front runners for the republican presidential nomination need not apply to this job description).

Dave, As a Libertarian living in Michigan, I would just like to add to your well thought out post that... There is no such ting as a responsible and actually conservative Republican administration. I've spent 20 years looking for one. I believe that there is only one way to get "change we can believe in" and that is to support true conservatives. Vote Libertarian! Let's throw the traitors out!!!

This is just another example showing that at a certain point higher taxes do not produce higher revenue for the government. At a certain level, higher taxes induce more people not to work as hard. What is the benefit of working harder? Losing more of your money?

I've read a lot of complaining and "I told you so!" but I don't see any answers to the problems. And "cut spending" is not an answer. Specifics of HOW you are going to cut spending, along with an explanation of the ramifications of those cuts is an answer. Raising taxes was an answer to the revenue problem, however its obviously not working. I am sure Michigan has larger problems at work above and beyond high taxes. I do not believe for a second that Michigan has higher tax load than its neighbor states, especially in the larger cities (Indiana sales tax - 7%. Indiana income tax in Indianapolis - 4.4%). Ohio has a tiered income tax with a rate that tops out at 6.9% and sales tax at 5.5%. The Chicagoland sales tax rate is 10.25%.

Taxes are not the reason for Michigan's ongoing problems. The lack of jobs and the dependence on the auto industry might have a bit more to do with it...

Ben --

For sure the problems with the auto industry is a MAJOR issue, but you're not going to attract new businesses by raising their taxes and the taxes of their employees. Does that make sense to you?

In my first piece, I suggested at least one BIG money saver. I'm sure there are others. Just like people can't spend more than they earn, states can't either. And if you can't (or shouldn't) raise taxes, then you HAVE to cut spending.

What's your solution? And do you even live in Michigan? Do you know what's going on here?

Guess what? There will be another tax hike coming in Jan 2009. Don't you just love it. The voters of this state need to take an hour of there busy lives to look at whats coming on the planned proposals November 4th. Has anyone seen the GOVERNMENT REFORM PROPOSAL-as Jenny would say "This proposal will really blow you away. check it out if you find the time.

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