Strategically Placed Comma sends Michigan’s Business, Tax Climate Soaring!

Pop English quiz. Who can tell me the difference between these two headlines?

Michigan business, tax climate soars in Tax Foundation ratings, Snyder says

and

“Michigan business tax climate soars in Tax Foundation ratings, Snyder says”

Give up? It was the comma. The comma is what makes the Detroit Free Press headline remotely accurate. Because the Michigan Business-Tax climate did not, in fact, “soar” according to the Tax Foundation, though Rick Snyder would love for us to think so.

See, at the Tax Foundation “Business Tax Climate” means a very specific thing. It’s an aggregate of five different tax climates: Corporate Income Tax, Property Tax, Sales Tax, Individual Income Tax, and Unemployment Insurance Tax. That’s what the “Business Tax Climate” is. As distinct from the “Business, Tax Climate”.

See?

Here’s the lead paragraph in the Detroit Free Press article:

The huge changes in Michigan’s tax structure during 2011 has prompted the Tax Foundation to move the state from 49th in terms of tax climate to 7th.

Funny story…that’s not what the official Tax Foundation report actually says. In fact, Michigan’s OVERALL business tax climate is listed at 18th for 2012…DOWN from 17th in 2011. And our Corporate Tax structure is still at 49th for 2012.

“That’s weird” I thought. Would our Governor just LIE about something like this?

So I called the Tax Foundation. Those Tax Foundation dudes were REALLY nice and freely gave me their time and patiently explained to me what was going on.

Here’s what’s going on:

The numbers that Rick Snyder is touting are what are called “hypothetical” numbers. That’s the exact word the gentleman from the Tax Foundation used: “Hypothetical”. I’ll get to that in a minute. First an explanation of the changes.

Basically the official number posted on the website (18th overall in Business Tax Climate and 49th in Corporate Tax Climate) were made before Snyder’s tax policy took effect. So the Tax Foundation decided to see what Michigan might have been ranked IF the current tax policies were in fact accounted for.

So, if we could freeze dry the entire world and go back in time and change ONLY Michigan’s numbers, what would they be?

In this case, Michigan’s CORPORATE tax climate would have gone from 49th to 7th in the nation. CORPORATE tax climate. But Michigan’s overall BUSINESS tax climate would have gone up from 18th to 12th in the nation. A rise! But far from “soaring”. And a rise from an already above average number.

Okay…so why did the Tax Foundation fellow call the revised numbers “Hypothetical” numbers? Two reasons.

ONE: Because the special report assumes that Michigan changed but everybody else stayed still. But that didn’t happen. We really don’t know where we stand relative to other states. We can only guess.

and more importantly

TWO: The revised report does NOT include changes to the Personal Income Tax which INCREASED for 51% of Michiganders as child tax credits and low income home interest tax credits are removed and pensions are now taxed. Our personal income tax situation is getting worse here in Michigan, not better. That’s bound to be a drag on the overall Business Tax Climate.

it should be noted that Michigan’s reform also included some changes to the personal income tax, most of which do not come on line until 2013. These changes are not included in the estimate above.

What Snyder would like to have us believe is that we’ve dramatically improved our Business Tax Climate. We haven’t. Our tax climate was above average at 18th in the nation before Snyder’s tax policies took effect. Even if we apply the new changes without the increase in personal income tax, the rosiest picture is us moving up from above average to slightly more above average.

But even that “rosy” scenario is a distant estimate that doesn’t hold up under scrutiny. All he’s done is give more tax breaks to the mega-corps. GREAT news if you’re a mega corp. For the rest of us, not so much. But we knew that already.

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Muskegon Critic
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Comments

  1. Excellent work MC!

  2. Hector Solon says:

    Another headline “Michigan Plunges Among Pensioners Due to Tax Increases“.

    From a report from MSN Money “Best, worst states for retiree taxes” late 2010:

    “Where you live can make a lot of difference in how far your retirement dollars stretch, and the story goes way beyond which states have no income tax.”

    BEST STATES

    Best: No. 1 Alaska
    State income tax: None
    State sales tax: None
    Inheritance tax: No

    [AK] actually gives residents money for living there, distributed from its Permanent Fund, an oil wealth savings account administered by the state. This year, every man, woman and child who has lived in Alaska for at least one year received a 2009 dividend of $1,305. There’s no income tax, no state sales tax, and only 25 municipalities even levy a property tax (Retirees paid to live there, what a deal from Big Oil).

    Best: No. 2, Wyoming
    State income tax: None
    State sales tax: 4% (localities can tack on an extra 1%)
    Inheritance tax: No

    WY collects from oil and mineral companies, residents shoulder the lowest tax burden of any state except Alaska, according to the Tax Foundation. Prescription drugs and groceries are exempt from state sales taxes (Another corp welfare state there Big Oil and Pharma).

    Then… there come’s Michigan and it’s CEO Nerd Herd:

    Best: No. 3 Worst: No. XX Michigan
    State income tax: 4.35%
    State sales tax: 6% (GOPer want this HIGHER now)
    Inheritance tax: No

    The Great Lakes State offers generous retirement-income now provides squat for exemptions from state income tax. It does not tax Social Security or military, federal, state- or local-government pensions. Private pensions are exempt up to $45,120 (IF you have any, 300,000+ Michiganders are out of everything unemployment (also cut) and have been emptying their 401k accounts(if they had one in the first place)) for individuals and up to $90,240 for married couples filing jointly.

    Our university economists have been talking for years about how the “most efficient’ import of capital into the State is retiree pension payments. The folks at the BLM/CFM were sitting in these briefings and know this… idiots.

    Nice post.

  3. Good post. They like to release very misleading data. I think this is the type of list that you don’t want to be #1 on if you want to keep any of your public services running efficiently. I wrote about these rankings last spring on my blog http://www.michiganpopulist.org/?p=23. I noted that the next thing Republicans will want to do after they cut almost all taxes is to cut wages. The two together make up the “business climate.” I imagine if Mexico we could include Mexico in the list that it would b ranked #1.

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