It’s not just about taxes for business

Guest Editorial
Gov. Rick Snyder and fellow Republicans who control the Legislature made huge progress in the last two weeks with their high-wire plans to reinvent Michigan.

At the heart of their political crusade is lower business taxes. Now many are asking whether it will work. Beyond enriching business owners, will it mean more jobs, more prosperity for the state?

The answer is complex. Lowering business taxes — getting rid of them altogether for more than 95,000 small employers — is critical to improving Michigan’s business climate. It is also just one piece of the puzzle.

State government has two equally significant hurdles ahead of it once lawmakers get through this budget process. They need to: 1. Pare back a regulatory structure that many business owners see as needlessly bureaucratic and costly, and 2. Lead government, at all levels, to be streamlined and stable.

Look at the three reforms — low taxes, streamlined regulations and stable government — and how they work:

• Taxes — State government cannot lower the cost it passes on to employers enough to offset the low cost of labor that manufacturers can find in Mexico, China or India. But it doesn’t need to. Michigan has huge advantages that foreign countries don’t — starting with a well-educated pool of workers.

Those advantages also were not enough for the last decade, as the state bled jobs. So, lowering business taxes — and getting rid of gimmicky tax breaks that reward some industries and punish others — is a clear, and hopefully immediate, change that gets existing employers’ attention and gives them more cash to spend on their business. Expansions within the state is the best potential for short-term job growth.

• Regulation — No one, not even the pro-business Michigan Chamber of Commerce, disputes the need for government regulation, such as environmental and workplace protections. The private sector is hurt, though, when the regulatory structure weighs it down with inefficiency and high costs. As an example, consider the state’s unemployment system, which is ripe for reform.

• Government — A major advantage that the U.S. has over foreign countries is stability at the top. There’s no risk of a civil war, like in Libya, that will dry up oil production. There’s little chance our federal government will hack into a company’s computers, as China did to Google.

But employers take notice when the rules keep changing. Michigan government replaced the unpopular Single Business Tax with the even more unpopular Michigan Business Tax. Lawmakers twice briefly shut down government in three years. Local governments are wildly inconsistent from county to county.

This is what the governor is trying to change. It’s a long-term strategy and yet, it may have short-term benefits if employers already in the state use money saved in taxes to create jobs or invest in their businesses.