By Kathy Barks Hoffman
Associated Press Writer
LANSING (AP) — It’s no secret that the past decade has been a train wreck for Michigan.
But amid all the bad economic news of lost jobs, falling home values and rising costs for college tuition, at least one item isn’t weighing as heavily on the family checkbook.
Michigan residents are seeing a smaller percentage of their personal income go to state taxes, according to the nonpartisan Senate Fiscal Agency.
The SFA recently reported that “tax burdens have fallen significantly” in the state between 1999 and 2009.
That doesn’t mean most Michigan residents or businesses are feeling flush these days.
The state still has the nation’s highest unemployment rate and one of the highest rates for home foreclosures.
And per-capita income has dropped, from being 18th-highest in 2000 to 37th in 2008. It’s likely to fall further once 2009 figures are known.
When Michigan residents ask themselves if they want additional cuts to their public schools, universities, police and roads, it’s important to know the role taxes are playing in their lives.
These days, they’re paying a slightly higher percentage of their personal income toward the state education tax, a portion of property taxes that goes to local public schools, than they were a decade ago.
But they’re paying a smaller percentage in income, sales and use taxes.
Statistics show Michigan has fallen from having the 16th highest state and local tax burden per person a decade ago to 30th now. Considered as a percentage of personal income, the state tax burden has fallen from 14th to 20th.
The same is true of taxes paid by Michigan companies.
Even with the switch several years ago from the Single Business Tax to the Michigan Business Tax and its unpopular surcharge, companies are paying less once the offset for the personal property tax is figured in.
“Michigan’s corporate tax burden fell from 12th in 1989 to 39th in 2007 ... the largest drop in tax burden among all the states,” economists Eric Scorsone and David Zin wrote in the SFA report.
While the state used to annually get $10,000 to $12,000 per person in income tax revenue, by last year that number was down to $6,000, according to the fiscal agency.
Sales tax revenue also has tumbled as people have shifted from buying mostly goods to buying more services, which largely are exempt from the tax.
Residents also are spending less, which means less sales tax revenue is being collected.
While the lower tax burden has helped taxpayers, it has created budget problems for schools, universities and state programs that no longer are getting as much money from the state.
General fund revenue from ongoing revenue sources has dropped from nearly $10 billion in fiscal 2000 to around $7 billion this year, and the school aid fund has dropped by around $1 billion the last two years, according to the fiscal agency.
When inflation is taken into account, the general fund is taking in half of what it did a decade ago, and the school aid fund has dropped 20 percent from its peak seven years ago, according to Michigan State University economics professor Charles Ballard.
“There’s been a lot of rhetoric for a long time that big government is a problem,” he says. But “the government, in Michigan at least, has shrunk.”
Still, problems persist. The state faces a $1.7 billion deficit in the budget year that starts Oct. 1, and additional cuts are expected.
School districts are starting to hand out pink slips to thousands of teachers statewide.
The state has pulled hundreds of road and bridge projects off the planning board since it can’t raise the matching funds needed to win federal transportation dollars.
More police officers and firefighters may lose their jobs, college tuition is likely to rise and state oversight of food safety, the environment and child protection likely will be cut.
Democratic Gov. Jennifer Granholm has proposed extending the 6 percent sales tax to most services and using the extra revenue to pay for public education and a phase-out the business tax surcharge.
She also wants to lure tens of thousands of senior state workers and teachers to retire. Neither plan is making much progress in the Legislature.
A coalition of education, labor and social services groups want to close tax loopholes, extend the sales tax to services and move from a flat-rate income tax to a graduated one that would increase taxes on those making over $120,000.
“Restructuring Michigan’s tax system could eliminate the need for more painful budget cuts and could allow for the restoration of badly needed services that assist families and children during challenging times,” Sharon Parks of the Michigan League for Human Services told a House committee earlier this year.
For tea party advocates such as Joan Fabiano of Holt, however, higher taxes aren’t a solution, even though residents are paying less in taxes than a decade ago.
“There definitely needs to be some really hard choices made because of the position Michigan is in,” she said. “I think the state has to cut its spending.”
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