Look at expanding sales tax, but don’t duck real reform in state government

The taxes that fund Michigan government are not providing enough money to pay the civic bills.

Property taxes, income taxes and sales taxes are not doing enough to keep state government as we know it — now and for years to come — out of financial peril.

A common response is to raise taxes, but let’s remember that the Legislature already forced individuals to pay more income tax three years ago. Seniors enjoy a lucrative tax code, but we concede that the political will does not exist to antagonize the most reliable voting group.

The best and most partisan approach would be to look at sales taxes. Gov. Jennifer _Granholm, a Democrat, and the thoughtful advocacy group Business Leaders for Michigan agree there is a way out:

1. Expand the sales tax to services that are now not covered.

2. Lower the tax rate from 6 percent. Granholm suggests 5.5 percent; others say 5 percent.

Put those together, and you have an option that deserves a serious look. It would be a tax cut on some purchases, while producing hundreds of millions of dollars for state government. We have not been a fan of expanding the sales tax to services, but it seems to be the best of many poor alternatives.

Having said that, we worry that any revenue enhancement strategy would create a temptation that many politicians — Granholm foremost among them — would find hard to resist.

The temptation would be to squander an opportunity to restructure state government for the new financial reality in this state. Many of the jobs that have been lost due to the downsizing of the auto industry won’t come back, meaning lower tax revenue for years to come. Lawmakers, therefore, must limit the size of state government.

Instead, they have spent eight years bailing out. They have raised taxes and fees, used accounting gimmicks and spent every last cent of available money. Currently, federal stimulus money is propping up the state budget. That, too, will end.

Granholm is signaling she would redirect any cash from sales-tax reform to public schools. In fact, she is threatening to veto any legislation that would cut even a penny for K-12 education. That is not a wise move.

School boards already are making money-saving moves for the next school year. For the first time, there is serious talk about having schools share services or administrators. Some local governments are thinking creatively and working together.

Simply pump more money into state government, and much of that innovation — painful though it is — would stop. It’s hard to agree to rewrite the tax code if there’s no chance that government will use its new bounty responsibly.

We suspect many state residents feel the same way. They’ll pay a little more if they feel government is making the right decisions for the future. That must be demonstrated before asking for additional taxes — like now, while the state budget is being crafted.