Politicians are going back and forth on how to bring jobs back to Michigan. Most of your typical politicians in Lansing want to give tax breaks or tax-funded grants to businesses to bring their business here. Some are only temporary as we witnessed with the Michigan Film Incentives, in which some reports show the film industry took in more than they gave back. Temporary business is not what we should be looking for – we need permanent jobs from businesses who are willing to come to Michigan and stay.
However, with a high, unnecessary business tax that punishes businesses for staying in Michigan, why would they want to come? Currently, sales tax and income tax are the two primary sources of Michigan tax funding by far. 56.4% to be exact versus only 8% in revenue from the business tax. So how can more of the two primary sources of income for the state be generated without raising income and sales taxes? Simple – remove the business tax completely, which will bring businesses, and the jobs that come with them, to Michigan. As we all know, when businesses sell a product, they charge a 6% sales tax on the majority of items purchased by consumers. When people go to work for those businesses, they pay an income tax. When more businesses come to Michigan, they will generate more sales tax and more income tax (with no raises to either) and will easily make up for the “lost revenue” by the removed business tax.
I have had people ask “So are we just going to not tax businesses at all?!” They’re already being taxed on several levels already, so the business tax is no more than a tax for doing business in Michigan. Penalizing businesses to stay here is not the way to keep businesses here. They’re already being taxed and pay taxes, so why add another? They pay property taxes just like we do on our homes, or their landlords do if they rent. They collect and pay income taxes on employees. They pay capital gains taxes. They pay taxes on their profits. They collect and pay sales tax on purchases by consumers. Then on top of that, they pay a business tax. Currently, Michigan ranks 48th out of the 50 states regarding corporate-friendly tax rates according to taxfoundation.org. That won’t bring businesses or jobs to Michigan.
Besides, we would not be the only state who does not have a business tax. Texas, South Dakota, Washington, and Wyoming do not have a business tax. In fact, Texas, South Dakota, Washington, and Wyoming go one step further – they don’t have an individual income tax either. Now putting that into perspective, the unemployment rate in Michigan is at 11.2%. The unemployment rates for the other states with no business tax or individual income tax are:
- South Dakota: 4.7%
- Texas: 8.5%
- Washington: 9.1%
- Wyoming: 5.8%
So remove the business tax and businesses will come to Michigan with jobs? The simple answer is…yes. However, changing the name to a “corporate tax” and taxing pensions will NOT bring businesses to Michigan and will NOT stop the mass exodus of people leaving Michigan in search of jobs.