Many of our recommendations laid out in our new report, A path to good-paying careers for all Michiganders, involve increasing public investments. Which raises the question, “how do you pay for those essential public investments?”
We have long believed, and the data show, that the states and regions with the most prosperous economies––the broadest middle class––will be those who make pubic investments in the assets needed to prepare, retain and attract talent. That ultimately it is talent concentrations, not low taxes, that matter most to economic prosperity. And it is increasingly clear to us that public investments are part of what is needed to broadly share prosperity.
So yes, to implement our recommendations will almost certainly require state taxes/revenue to be higher than it is today. But we think that what that revenue can purchase has the best chance of obtaining a higher standard of living for all Michiganders.
That said raising taxes is not our goal. It is a means to making the kind of public investments we think are essential to the goal of good-paying careers for all Michiganders. Getting to the goal is what is important. We are open to any and all ideas on how achieve the goal.
What about low taxes as a path to prosperity? As we documented in our State Policies Matter report, Minnesota has the Great Lakes best economic outcomes and the highest taxes in the Great Lakes. Minnesota ranks 46th in the latest Tax Foundation state business tax climate index. Michigan ranks 12th. High taxes have not prevented Minnesota from having the economic outcomes all Michiganders want: third in the proportion of adults who work, 14th in per capita income and eighth in employment earnings per capita. Michigan on those measures ranks 40th, 32nd and 36th. One can make a strong case that the increased public investments those higher taxes enabled is a major reason for Minnesota being the most prosperous Great Lakes state.
Michigan’s experience over the last twenty years provides ample evidence that cutting taxes is not a way to increase state prosperity. In 1993 Michigan taxes (state and local combined) per capita were three percent above the national average and the state’s per capita income was three percent below the national average. In 2004 the state’s taxes per capita had fallen below the national average by three percent but we had fallen even farther behind the nation in per capita income, trailing the nation by six percent. And in 2013 (the last year for which tax data is available) the state was twelve percent below the national average in taxes per capita and twelve percent below the national average in per capita income. (The tax data comes from a 2013 Tax Revenue Comparisons: Michigan and the U.S. Average report by the Citizens Research Council.)
The places with the strongest economies are those that combine high quality education systems and high quality of place that retains and attracts mobile talent. Both education and placemaking require public investments. These types of public investments, paid for by our taxes, is the state policy playbook most likely to return Michigan to high prosperity, creating an economy with lots of good-paying jobs. Add to that making shared prosperity a priority and it gives the state the best chance of getting Michigan on the path to good-paying careers for all.
By adopting policies that transforms education from birth through retirement and investing in it the state can best help all Michiganders have the skills necessary to have good-paying, forty-year careers. By creating regions across the state with the quality of place where talent from across the planet wants to live and work the state can attract high-wage employers and entrepreneurs that start high-wage businesses. And by establishing and investing in policies that help those not in high-wage work work more and earn more we can share prosperity widely. This is the recipe for a 21st Century Michigan where each of us can pay the bills, save for our retirement and the kids’ education and pass on a better opportunity to the next generation.