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1 Alex Wood-Doughty & Kail Padgitt, Michigan Gov. Snyder's Budget Improves Competitiveness but Costs Individuals 1 (2011)

handle is hein.taxfoundation/ffcgcxz0001 and id is 1 raw text is: , \10\ FOUNDATIONV Marc! 9, 2011 \o. 262 Gov. Snyder's Budget Improves Competitiveness but Costs Individuals By Alex Wood-Doughty and Kail Padgitt Michigan, once the proud center of the thriving American auto industry, has been in decline for some time. In 1999, the state ranked 21st highest in the U.S. in GDP per capita; in 2009 it was ranked 41st.1 In 2009 alone, per capita GDP fell by 5.2%,2 and while Michigan's unemployment rate reached a two-year low of 11.1%3 in December of 2010, it remains much higher than the national rate of 9.4%.4 There is strong evidence that people flee Michigan's failing economy in search of a better work environment: the state's net domestic migration rate was negative for all of the 2000s,5 and between 2000 and 2007, an estimated 326,712 people left Michigan for another state.6 Likewise, a 2009 study by Michigan State University found that 49 percent of the school's Michigan-native graduates leave Michigan, up from 24 percent in 2001, while the University of Michigan had 53 percent leave.7 This brain drain deprives Michigan of a vital part of its workforce and contributes to the continuing decline of its economy. On February 17, Governor Rick Snyder (R) released his proposed budget for Fiscal Years 2012 and 2013. It includes an ambitious plan to overhaul the state's business taxes. The broad outlines of the plan are to eliminate the Michigan Business Tax (MBI) and replace it with a more conventional corporate income tax. In order to make up for lost revenue from the switch, Snyder has proposed to eliminate most targeted business tax incentives, expand the individual income tax to pension income, and cancel future income tax rate reductions. Business Taxes Coporate Income Tax Snyder proposes replacing the current Michigan Business Tax (MBT) with a 6 percent corporate income tax. The MBT is a combination of a corporate income tax and a gross receipts tax. Under the current system, corporate 1 Gross Domestic Product By State. Bureau ofEconomicAna!ysis, 2011. l t1p:/iNxvwbea.go\ /egonaigsp/ 2 Survey of Current Business, Tables. Bureau ofEconomicAnaJj'sis, Dec. 2010. b:ti~p:/iww.bea~gov/sipdf/201 0i12%20 ~Oiecetibe /i~10 (gdp state--lawe..)d 3 Economy at a Glance: Michigan. Bureau of Labor Statistics, 2011. _tip __ b _ggo--------c_'a-g/-ag.t-i.htn eag i. 2 4 Economy at a Glance: United States. Bureau of Labor Statistics, 2011. hitp:i-.-- ,,- li---j-e-ao.e-g-u--ht 5 Estimated Rate of Net Domestic Migration: Michigan. U.S. Census Bureau, Dec. 2009. htW://wxw ,:mnch;oan oo ents/c-ci' C-Dom'igo-0(09 305586 7.pdf 6 State to State Migration Data, Tax Foundation, 2011. http: //interacdve.taxfoundadon.orgimig~ation/ 7Ron French, Half of University Grads Flee Michigan, The Detroit News, April 3, 2009. hi;tr': / i-ww\ detnews.coln/iarntice/200904 -H 3 !METRO/904030378

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