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Tax Cuts Strengthen Cities…

Posted to MichiganNow.org on Wednesday, March 21, 2012

Cut taxes on new equipment for businesses and cities will become strong again. That’s the word from republicans at a conference in Lansing yesterday and today. It’s put on by the Michigan Municipal League.

Economic growth is inching up and unemployment is inching down. State republicans say credit their $1.7 billion tax cut last year. Now they want to cut $400 million more. They want to eliminate the tax on new business equipment like a lathe, a saw or a drill press.  State Senator Mike Nofs is a republican from Battle Creek. Nofs and the lieutenant governor spoke together to mayors, managers, and city council members. Nofs says small manufacturers deserve tax cuts now.

“They’re the sustaining groups that we need in our communities that help us provide the jobs and once you have the jobs you know people are working. They can pay for the schools and government and everything else that we cherish every day. So we need to give them relief.”

Mike Nofs and the lieutenant governor are asking for local governments to have faith in small manufacturers. Here’s the chain reaction they describe: a local machine shop can avoid new taxes on a drill press. The shop makes more money. The shop hires new workers. New businesses start up. More money is circulated. Local governments are able to bring in taxes from a larger pie. Then most budget problems will be solved. Senator Nofs says:

“It’s going to keep our businesses on the cutting edge and be competitive. If you stay back and use the old presses maybe it takes a lot longer to make that widget. Well with a new press you could make 5 widgets compared to what it used to take where you could only make one. Now you can sell 5 and you can make more money but we’re going to tax you today because you bought that new press. But under this package of bills we won’t say that. We’ll say thanks for buying that. Thanks for staying competitive. Thanks for staying in Michigan.”

Senator Nofs and the lieutenant governor mentioned replacing the income local governments would lose. But they didn’t explain how. People at the Michigan Municipal League Conference are worried. Rogers City would lose $112,000. The city manager would have to lay of 2 of his 24 city employees.  The Mayor of Dearborn said he would lose about $15 million. Summer Minnick is the MML’s director of state affairs. She disagrees with the senator and lieutenant governor’s proposals.

“This is a problem they’re creating. And right now we have a pot of money that is retained locally and spent locally that they want to take away, shrink and redistribute.”

Lieutenant Governor Brian Calley told the audience that Michigan can’t run fund state and local governments in the same familiar way, hoping things will improve. Calley said it will just mean more budget deficits. The Municipal League’s Summer Minnick says:

“Since 1939 we’ve been giving up local taxing authority for a revenue sharing agreement and we keep getting cut. So that’s our position as well. We can’t keep signing on to that type of agreement.”

State Representative Bob Constan came to the conference. His district is in Allen Park, Inkster, Garden City and Dearborn Heights.

“Changing the current way we tax industrial personal property, it’s my opinion that will not create one job. It will not make any difference to any manufacturer to employ more people here in the state of Michigan.”

Constan argues that government can fall victim to companies who say they’ll invest only if they get tax cuts. They can be manipulative and play governments off against one another other. Such accusations were made against companies like Electrolux and Federal Mogul in the last few years. Constan describes a negative experience with the movie industry.

“I had in my district, Unity Studios. We were always in these meetings with this scam artist who was the head of Unity Studios, Jimmy Lifton, and he was talking about, well we’re gonna go to Shreveport Louisiana.”

Representative Constan says that businesses chose a location based on the quality of the workforce and quality of life in the area.

“I believe a business, if they’re gonna locate in the state, looks at a variety of things and the industrial personal property tax is way down on the list.”

The MML’s Summer Minnick agrees with Constan. Her organization has spent years trying to convince the state legislature that tax cuts don’t create jobs. Instead, vibrant cities attract smart people who then create jobs. She says Michigan should not throw out the tax on equipment for manufacturers.

“The fact still is, 37 states still has some form of PPT. So the vast majority of states still tax that industry. And the other thing is, instead of comparing ourselves to Ohio and Indiana we really need to start talking about how we compete globally. And the only way to compete globally for the best and the brightest ideas and people is if we start making investments in those places where people want to be.”

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