STEPHEN HENDERSON: A progressive way to get more revenue in Michigan
It’s the first question that gets asked when someone suggests we need more money for education or infrastructure, for cities, public health or public safety.
Who’s going to pay for it?
The assumption in that answer, of course, is that the universe of available funds Michigan has to address those issues isn’t sufficient. And that’s true, by a number of measures.
State revenue growth in Michigan between 2002 and 2012 ranks dead last (30% compared to about 60% for states in the middle and more than 160% for Alaska at the top) nationwide, according to the Michigan Municipal League.
But also implicit in that question is a dire skepticism that more revenue — through new taxes or fees or structural changes in existing revenue generators — can or should be raised.
The narrative in Lansing, dominated by Republican legislators and Gov. Rick Snyder, is that more revenue should come from economic growth, rather than new sources.
It badly needs expanding, to a more reasonable consideration of ways to get more money to do more vital things. Look at the condition of our schools, our roads, our oversight of child welfare. Money isn’t always the culprit — but it’s almost always a contributor. Think of Flint. More money in the city’s coffers, and they’re not hunkered over ledgers, looking to save money on clean drinking water.
Rep. Jim Townsend, a Democrat from Royal Oak, last year suggested a keen reform that would generate about $700 million more for the treasury each year, while giving most taxpayers a break.
A progressive income tax, rather than our flat 4.25% levy, would spread the burden of revenue generation more fairly and give Lansing more money to invest in the neediest parts of state government.
Townsend proposes a sliding scale of income taxes that kick in at 3% of the first $20,000 earned, and grow to 10% on every dollar made over $1 million.
People tend to recoil when you announce that higher number, thinking that even though most earners rake in a lot less, the rate for middle-class families would probably represent a hike over what they’re paying now.
In fact, Townsend says 95% of filers would realize a reduction under his plan.
Earlier this month, Townsend and his supporters produced an online tax-equality calculator where citizens can go and find out how his proposed changes would effect them.
I went and played around with the calculator and found some interesting numbers. For instance, joint filers whose taxable incomes are as high as $150,000 a year would see tax reductions.
That means nearly all middle-class families would pay less.
Single filers would get hit at a lower threshold, depending on the deductions for which they qualify.
The plan doesn’t have any personal benefits for me. I’d pay more under Townsend’s plan. I support it because it’s good policy.
The truth, from these numbers, is that even if you believe the tax burden here in Michigan is too high, and you’re not willing to pay more, this reform wouldn’t likely ask more of you.
And what about fairness? Is it right, for instance, to put more of the tax burden on higher earners?
Well, the federal government already does so, and so do 35 other states, including many with way healthier revenue streams and economies than Michigan has.
Townsend also makes a more general point about fairness. The flat income tax gets sold as fair because everyone pays the same. Of course, that doesn’t account for the varying utility of money — 4.25% of $100,000 is not generally as devastating a bite as it is for someone who makes $30,000. And with the changes in deductions for low-income earners, the state is taking a bigger chunk of poor people’s earnings.
But as Townsend points out, the state’s other flat taxes help exacerbate the imbalance.
“The top 1% pays 5.9% of their income in overall taxes, when you count income, sales, excise and property taxes, while middle- and low-income people pay over 9%,” Townsend said. “The graduated income tax would offset that inequity by requiring high-income people to pay income tax at higher rates.”
Townsend faces a seriously uphill battle getting the proper attention to his proposal. It would need a two-thirds super majority of the Legislature, and then approval by citizens in a ballot referendum.
It’s not just Republicans (who have long protected high-income earners by purporting to be looking out for middle-income folks) who are against it. Lots of moderate Democrats fall into the same trap. And given the overall weak Democratic numbers in the state Legislature, this seems unlikely to even get much of a hearing.
But then, there are the ongoing struggles with revenue. The lack of money for basic state services, and the awful service level that accompanies it. At what point does it become enough?
When do we get to the point where Michigan citizens are willing to talk more frankly about how more revenue could help solve our problems and how ideas like Townsend’s could accomplish that without much pain for most taxpayers?
It’s no reflection on Townsend that this proposal can’t get traction. He’s trying to be responsible — searching for revenue to pay for the improvements in state government that he believes deserve investment.
But it does say something about all of us that an idea like this can’t even get a hearing. And it says nothing good about our willingness to work together, or open our minds, to new ways of solving our problems.
Stephen Henderson is editorial page editor for the Detroit Free Press. He is the host of “Detroit Today,” weekdays at 9 a.m. on WDET-FM (101.9) and “American Black Journal,” which airs at 12:30 p.m. Sundays on Detroit Public Television. Follow Henderson on Twitter @ShendersonFreep, or e-mail him at email@example.com.