The Snyder budget is a good start for Michigan

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March 27, 2011

Responses:

 

Gov. Rick Snyder has taken bold steps to provide a balanced budget for Michigan under the guise of “shared sacrifice”. I give him high marks for offering a two year budget proposal, changing the way businesses are taxed, and adding retirees’ income to the tax revenue base. He also avoided the disastrous anti-collective bargaining proposal that Gov. Scott Walker in our neighboring state of Wisconsin has signed into law.  Those are all good points. I think and hope that he is open to compromise on some elements of his proposal.

Personal income tax

            Snyder proposes simplifying the Michigan income tax by eliminating a number of the credits available, but not the homestead property tax credit. He would retain the personal exemption at $3,700 with a phaseout beginning with income of $75,000 (couple at $150,000).  The tax rate is scheduled to decrease to 3.9% from the current 4.35% but he wants to freeze it at 4.25%.  1

            Snyder rightfully includes taxing retirees’ pension income. This income has long been exempt for the most part, currently up to $45,120, double that for couples. While it is a wonderful benefit not to pay Michigan income tax now that I am retired, it is also unjust. I have an obligation to support my state government just like everyone else. To compound the injustice, I even get a refund from the state for part of my property taxes in excess of 3.5% of total income. This additional tax base will produce about $1 billion in tax revenue.

EITC

Snyder proposed eliminating the Earned Income tax Credit in Michigan.  According to Susan Tompor at the Detroit Free Press, “Whacking this deal would save the state $354 million”. 2 This credit is a direct benefit to the working poor. For most citizens an extra $400 to $1,000 would not make much difference in the way we live, but for those who are eligible to claim the EITC it makes the difference in food purchases, a rent payment, or, paying for health care. To put it another way, the money paid out under this credit will go directly to the economy. Recipients will spend it, not save it or invest it.

Michigan Business Tax (MBT)

“The Tax Foundation ranks the MBT as the 48th worst business tax in the country. But it rates Michigan’s overall business tax climate as 17th best in the nation, up from 28th in 2006,” according to the Michigan Truth Squad. 3 Snyder is not just simplifying the business tax. He is reducing the total revenue from business by $1.2 billion, about a 60% reduction from the current $2 billion. More importantly it is a major shift from about 11% of total revenue down to 4.3%. 4 He is following the mantra of “lower taxes for business produce jobs”, but that has been debunked in many studies. 5

Education funding

The Governor touts his support of K-12 and higher education, but his support means a reduction of about $300 per pupil on top of a $170 reduction this year. 6 A good education is necessary not only for good citizens but for a pool of workers for business. While the Governor says he will propose a comprehensive plan for education, reducing per pupil funding does not appear to be a good start.

Conclusion

            I propose the state personal income tax be frozen at the current rate of 4.35%. This would increase revenue by $200 million over Snyder’s proposal.  Proposal A passed in 1994 turned over local school property taxes for operation to the state. The purpose was to equalize funding around the state. This has clearly failed and I propose Proposal A be rescinded. I also propose that the 500+ school districts be reduced through consolidation on a county level. Transportation and technology makes this reorganization very feasible and fiscally responsible.

            I propose the corporate tax rate be at least enough to equal the current revenue generated from businesses. They benefit from government services as much, if not more than individuals. My estimates indicate a tax rate of 16%.

            I give Gov. Snyder high marks for his proposals, but I hope that he will be open to compromises. The false mantra of “cutting taxes” to provide jobs has got to end. My recommendations provide for more fairness while still holding on to a budget of “shared sacrifice”.

 

1 http://www.crainsdetroit.com/article/20110217/FREE/110219889/snyder-budget-the-era-of-the-tax-credit-is-over#

 

2 Susan Tompor, ‘Tax credit faces cut”, Detroit Free Press, 12:13 AM, Mar. 6, 2011, http://www.freep.com/article/20110306/COL07/103060405/0/HSS/Susan-

 

3 Michigan Truth Squad, http://michigantruthsquad.com/snyders-proposed-budget-analysis/

 

4 Amy Lane, Snyder tax break for business: 60%, http://www.crainsdetroit.com/article/20110313/SUB01/303139970/snyder-tax-break-for-business-60

 

See also  Michigan Department of Treasury Annual Report 2009

http://www.michigan.gov/treasury/0,1607,7-121-44402_44404---,00.html

 

Michigan Gov. Rick Snyder presents $45B budget, Feb 17, 2011  | 

http://www.wzzm13.com/news/article/153876/2/Michigan-Gov-Rick-Snyder-presents-45B-budget

 

5  Norbert Bufka, It is time to end welfare for the rich and super rich!, October 2009http://www.thisonly.org/Articles/End%20welfare%20for%20the%20rich%20October%202009.htm

 

6 Michigan Policy Network, “An Analysis of Governor Snyder's Budget Proposal for K-12 Education”.

http://michiganpolicy.com/index.php?option=com_content&view=article&id=1018:a-comprehensive-analysis-of-governer-snyders-budget-proposal-for-k-12-education&catid=75:k-12-education-blog&Itemid=132

 

 

Responses:

________________________________________

From: GT

Sunday, March 27, 2011 11:24 AM

 

So the folks who are locked into a fixed income from a pension obtained over decades of work are now going to be TAXED over again. Your article makes me puke.  Many people are on meager pensions that don't have inflation  colas. Your article threw them under the bus. No way in hell I am paying for another 1.4 bil dollar tax cut for corporate friends of Snyder. Moving out of your crummy fascist state.

 

My reply:

Thanks for writing.

This may surprise you but I agree with you completely. After I wrote that column two weeks ago I had some good discussions with people about low fixed income pensions. These should not be taxed! The taxes should also not be used to finance a big cut in business taxes. I said that in the column.

   What is needed and I did not say it is a higher exemption than $3700 per person. If this is high enough then that would solve your concern, I think.

   I am puzzled by your use of the word “fascist” in regard to my column. or was it about Snyder’s plans?

 

From: GT

Sent: Sunday, March 27, 2011 7:44 PM

 

I apologize for using the term fascist. It surely wasnt meant to link you to that time in history. I do feel a sort of power grab being exercised by our new governor. I think the e.m.f issue is a power grab and a back door method of dismantling collective bargaining. I think a fairer approach to balancing the budget is a

A in sales tax on services which aren't taxed. A more progressive state income tax and or an increase in corporate income tax to say 7.0 percent. The problem here is his robust business tax cuts 1.4 bil being financed by new taxes on pensions and elimination of EIC for working poor. This is a targeted attack on seniors and working poor. Snyder last position is NO  compromise. Hence when the recall petition is initiated. I will be more than happy to see him recalled. The movement is gaining momentum. Thanks for your reply and best regards.

 

My reply:

We are in more agreement than disagreement. Apology accepted.

I like your idea of a progressive tax but a sales tax bothers me a little.

________________________________________

From: Al

Sent: Sunday, March 27, 2011 3:29 PM

 

Norbert

 

I must say I agree with some of your ideas about fixing Michigan.

 

However as a fellow retiree I find it irresponsible for you to suggest that all retirees should now have their retirement income taxed.

Certainly there are a handful of retirees drawing large pensions but for every one of them there are 20 or more trying to figure out

how to make ends meet on their so called fixed income as energy and food cost run rampant.   It wasn't bad enough that Snyder proposed eliminating the tax fee status of retirement accounts he also proposed eliminating the over 65 extra exemption and reducing the property tax credit.  While then taking that money and the EIC money and handling that back to business.

 

I am a retiree drawing a very modest state pension that keeps shrinking as my share of medical insurance rises, my home value has fallen yet the property taxes have remained as they were.  My extra retirement account lost much of it's value due to the bad business and banking practices of men like Mr. Snyder.  I was promised a tax free retirement when the state took control of my pension fund years ago, I have earned and hope I get to keep it, so I can finish what is left of my time on earth with a little modest dignity.

 

So please don't get on your soapbox and speak for all of us retirees as some of us, are struggling and losing $100 month to taxes would not mean giving up a luxuries it would mean deciding we will have heat or food.

 

Sorry, Norbert but like Snyder just because you feel something or someway about an idea it does not mean it is RIGHT. 

 

Mr. Snyder has not proposed shared sacrifice, he has proposed taking from the elderly and poor for the benefit of the business community, you did not propose that but to those in his corner you have added some degree of justification for his plan.

 

Al

 

My reply:

   Thanks for taking the time to reply. I had some more conversations with retiree friends and agree with you about taxing low pensions is a bad idea. So perhaps the better solution would be to lower the exempt threshold from $45,120 single (double for couples) to around $10,000 single and $40,000 couple. Would that work?

  (Note: I goofed. I meant $20,000 for couple in the above line.)

   There is a lot to be concerned about in his budget but I thought I could work at a compromise and hope he will too. Time will tell. Another respondent is urging a recall of Snyder.

 

March 28

Norbert,

Not sure how you arrived at 10K and 40K for couples that seems a bit unfair, how about 20K single 40K couples.

But thanks for replying so promptly,  I really do not think Rick Snyder understands at all the difficulties the poor and elderly face in this current economic situation.   He is single minded in his drive to make this a mecca for business, even though the reality of his plan will be negative on Michigan as whole in both the short and long term, it is simply to simplistic to work.

Al

 

My reply:

Thanks, Al.

Sure. I can go with that.

In my column I was just trying to give him a break since he is new, but I tghink your assessmentis correct. He ahs already latched onto the Republican mantra of lower taxes for business as if they create jobs, and studies have shown they do not.

Norb ________________________________________

From: JM

Sent: Sunday, March 27, 2011 9:04 PM

 

Norb . . . I agree whole heartedly with your proposals.  Like you, I am not taxed on my pension and while I do not relish the idea of starting to be taxed, it is only fair, as you say.  Proposal A has outlived its usefulness and is grossly unfair to rural districts.  A child in Bad Axe or Lake City should be worth as much as one in Troy or Livonia, which they currently are not and never will be under the current law.  I particularly agree with your statement on keeping the same revenue from business. Change it any way you want as long as you do not cut the current income to the state.

 

JM

 

My reply:

Thanks. I had two other emails today from new people blasting me for supporting taxing pensions.

 

March 28, 2011

Norb,

 

I will be the first to admit that I don't like the tax and I don't want it, but fair is fair.  I was surprised that you gave as much support to the Nerd's plan as you did.  Remember, I am not affiliatied with either party, but I thought your "democratness" (is that a word?) would have put you in direct opposition.  It is refreshing, and I mean this, to see a "democrat" say something positive about a republican.  Now, if we could just get it to work in reverse.

 

The Nerd has created a terrible weapon with his ability to appoint a manager.  It will be very interesting to see him use it.  When he does, he had better be very careful with it and he had better appoint a very, very good person.

 

Keep warm,

 

JM

My reply:

  Thanks. It was a deliberate attempt on my part to reach across the aisle. I too hope our legislators will do that so we can move forward.

  I too am concerned about the manager law, especially with the ability to end contracts. One of the contracts that should be ended is lifetime health insurance for legislators who have served only six years – starting at age 55. I may write about this in  my May column.

Norb


From: PM
Sent: Monday, March 28, 2011 11:18 AM

One point I’d like you to consider:  You statedHe also avoided the disastrous anti-collective bargaining proposal that Gov. Scott Walker in our neighboring state of Wisconsin has signed into law.”  Although Snyder didn’t do it in the blatant, ham-handed way Scott Walker did, he did sign the Emergency Financial Manager legislation, which allows one person (who receives a day and a half of training) to take over the financial and academic affairs of a school district, dismiss the elected school board and nullify collective bargaining agreements if a school district is in financial crisis.  He then put hundreds of schools into financial crisis by reducing per-pupil funding and requiring districts to pay more into the employees’ retirement fund. 

 

Snyder talks a good game, but at the end of the day, he’s in bed with the Mackinac Center and their ilk just as Walker of Wisconsin, Christie of New Jersey and all the rest are.

PM

 

My reply:

Thanks. I really appreciate your perspective. I too am concerned about that emergency manager plan. I was surprised it passed so quickly and easily.

Norb

From: DW

Sent: Sunday, March 27, 2011 10:13 PM

 

Norbert:  I read the piece on-line this morning.  I think you are too much the gentle soul.  The MDN takes advantage of you, and not merely in their headline writing.  The proposals promoted by a number of Snyder's Republican colleagues in the Legislature, taken together, are of the same effect as Walker's.  I agree that there may be some note of justice in taxing retiree pensions, even though it breaks a promise to those retirees and shows no rationale for exchanging that tax for the very generous breaks for business - which is what it does!  In that frame of reference I cannot agree that there is justice in it.  The idea of school consolidation might be a good one but the devil is truly in the details.

 

It is not productive, in my view to let an argument take the form of "high marks but hope for compromise." The other side will simply take the high marks and run leaving you with the shadow of hope. The large majority of readers of the paper will read the headlines and skip the rest while a few more will read the first few sentences before going elsewhere and very few will read the entirety, thus the strength of your argument is lost in the ending paragraphs. Reading other editorials in the local paper suggest strongly that the editors are deficient in both reasoning power and good intentions.  Their choice of headline makes my case, I think?  Yet another reason I am considering submitting my "stuff" elsewhere. 

 

All in all, a good try but. . . .?  Maybe more spleen and less good will?  More data and analysis would be welcome, too.  As Sherlock Holmes said:  Clay, Watson, I must have clay.  One cannot make bricks without clay!" (paraphrase?)

 

DW.

 

My reply:

Thanks. I really appreciate and value your opinions. I purposely tried to be open because there are so many who are not. Who is going to offer the olive branch inthis polarized environment? If no one does, where will we end up?

   I wrote the headline by the way so you can't blame the MDN for this one.

Norb

 

Norbert:  I understand your motives.  Still the headline may not have been best.  We would do well to remember that we cannot negotiate with extremists and every concession made in overture will simply be taken and nothing offered in return.  Only when they realize that their extremism is self-destructive are they likely to find an ability to compromise.  A lesson that some in Washington may need to relearn?

DW


From: CM
Sent: Monday, March 28, 2011 11:58 AM

Dear Norbert,

First of all, the headline the MDN chose for your article is quite misleading.  It implies that you favor the budget...and in fact, the way I read it is that you favor the idea of putting forth a two-year budget...very different things.

I am with you, now that I am retired, of enjoying a tax-free pension, but I also think it is unfair.  However, I think it needs to be gradually phased in.  Not everything has a nest egg to fall back on when taxes increase and especially for some of our older citizens, this may prove to be a hardship.

The idea that giving the business tax breaks will help is crazy, as your article explains.  But somehow, many people still buy that idea.  It is Reagan's trickle down economics... the magical thinking that business has a heart.  What it has is a bottom line.

Norbert, I am so outraged at what has happened to the tax structure...when we see GE paying NO taxes and getting money back from the government...Did you see 60 Minutes yesterday about the companies going to low tax country\ies...I'm trying to stay calm, but what is happening to my country?

Isn't it unthinkable that teachers are now the wealthy greedy people who are causing our financial woes?

All right.  I'm going to take a deep breath and stay calm!

Thanks for all that you do.

Peace,
CM

My reply:

Thanks,

  Excellent comments, especially the one about phasing in the taxation of pensions.

  I too am outraged by the tax policy in this country. My blood boils more when I think that Dave Camp is going to try to revamp the tax code. That’s like the proverbial fox garding the hen house!

   By the way I wrote the headline as an effort to be conciliatory in this polarized environment.

Norb

From CM

Well, don't write that kind of headline any more!!!  I often think the liberals have bent over so far backwards we're falling off the cliff!!!
________________________________________

From: JS

Sent: Monday, March 28, 2011 9:05 PM

 

Norb.  I thought your last column was very good.  I like how you started on a positive note re: Gov Snyder, gave good statistics and info, challenging some things, affirming others and how you gave several proposals and ended on a positive note as well as a challenge about fairness and  shared sacrifice” . 

________________________________________

From: NJ

Sent: Monday, March 28, 2011 9:26 PM

 

Norb-

    I was glad to see your article in the paper.... That always makes us happy, as you have such a balanced view.

 

    I don't know what to think about this whole tax mess.... But I do know that I don't think it is right to balance the budget on the backs of the poor. 

    I wasn't sure if you were against the EIC.... I think that is what you meant. I threw out an article yesterday - I think from the Catholic Weekly, which indicated that half of the children in Michigan (or was it half of the people affected would be children?) from cutting the EIC.... This is crazy thinking.  If people are hungry, they are unable to learn, to think, to grow....etc. 

    60 minutes had an excellent piece on child poverty in the US - I can send you the link if you want - about 10 minutes.  It was interviewing virtually homeless kids (living in their cars or motels with their families) who were hungry and they said how it felt.... Also, they talked of quitting school to get SOME work to help the family..... and they said they felt very guilty for their situation, because they knew if their parents did not have them, they could work less and have more money to help themselves.... It was very vivid....and sad...

 

    Seems we have to find a way to stop stockholders and corporations from expecting bigger and bigger gains each year - more and more "growth" for the upper class....

    And of course, last night, 60 minutes had and excellent piece on Tax Havens - offshore -  The CEO of a big corporation said that the US is losing money because we tax them too much, and we'll lose more and more, because other countries "see the light".....  Well, it seems to me that they want to do business here.... They want to use our infrastructure and our employees and to have our population buy their wares..... But they think poor old them have to pay too much - or they say their stockholders claim it is too much....

 

    As to pensions being taxed.... Well, some people have figured out their life, based on what was set up for them..... Now, they are being told that it has changed.... I could see if the law said that people who are starting out will have to pay (not that any of them will get pensions....) But for some, this is a drastic mid-stream change that will take a lot from their thin savings - along with higher and higher medical care costs, gas costs, food prices....etc.  Their pensions are pretty much set.... And then social security is also threatened.....

 

    So, lots to think about.  I can't believe that we plan to cut education and basically make Michigan a state of rich, older people.  Dow saw what happened when they cut most of their research at one point.... No new products and no way to catch up with other companies who had lots of new and creative ideas.  Someone expressed it as, "We thought we were cutting some fat, but we found we actually cut into the 'muscle' of our company and it took a long while to heal....."

 

    Basically, I still believe that we could build the economy with renewable energy and that we would grow.... But the Rep. are trying to first gut all of the "old social programs" and any power that they can squash.

 

    Thanks for putting yourself on the line - in print! 

________________________________________

From: JF

Sent: Wednesday, March 30, 2011 11:55 AM

 

Seriously, Norb?

Have you not looked into Snyder's emergency financial management proposal?

Have you not considered the tax breaks given the rich, part of what creates the so-called fiscal crisis?

Have you not noticed the widespread, concerted assault on the middle class, both from national and state governments?

What the hell?

 

My reply:

Thanks. I addressed some of those in my column. the emergency manager plan was passed after I wrote my column, I think, and it is not part of the budget, per se. at this point I plan to include that in my next column.

Norb

________________________________________

From: MD

Sent: Thursday, March 31, 2011 4:23 PM

 

saw your brilliant piece.  thank you.  I revel in all the parts of your credentials ... Midlanders want facts, figures, data and more ... and you provide it.  even more you do it with great intelligence, creativity and gentleness.


From: JH
Sent: Wednesday, March 30, 2011 10:39 PM

Norbert Bufka,

            As a fellow retiree I agree that we in Michigan have gotten a good deal on our taxes over the years and we should be willing to contribute to government costs.  However, I could not think of a worse time to raise taxes. Our economy is made up of the producers of goods and services (businesses) and the consumers of those goods and services. What this financial recession has caused is a weakness in the demand for the goods and services businesses produce as is evidenced in the sluggishness in employment, excess industrial capacity, high inventory levels, and the low level of interest rates to encourage purchases. To pull $1 billion out of Michigan consumers pockets and diminish demand at this time will only aggravate the recessionary problems. It is only common sense that a business, despite getting a tax break, will only expand and increase hiring when they can sell the product they produce which is a function of how much money the consumer has to purchase their product.

      It would make more economic sense to wait until the economy is well on its way to a full recovery before instituting any sort of tax increase that will impinge on the demand side of the ledger. At that point I will gladly pay a higher tax. The tax policy I see in place now only adds to the probability of a double dip recession.

 

My reply:

   Thank you very much for taking the time to email me your thoughts. These are definitely troubling economic times. I am now opposed to taxing pensions, but mainly for the reason that Snyder wants to use the revenue to give businesses a big break. I don’t think we can have it both ways. What you say makes abundant sense, but our legislators have tough decisions to make and I think one of them is a tax increase. They are afraid of talking about that and doing it. At least Snyder has put tax increases on the table.

 

Norb

                                                              John Hoops