MI Cuts Taxes; Why Not CA?

John Seiler:

Michigan has been mired in a Depression a lot longer than California. But late last year its unemployment rate, long the worst in the nation, dropped to third-worst. California moved up to second-worst, behind Nevada.

Michigan and California both have new governors replacing highly unpopular governors who ran up deficits. In Michigan’s case, Republican Gov. Rick Snyder (pictured at right) replaced Democrat Jennifer Granholm. In California’s case, of course, Democratic Gov. Jerry Brown replaced Republican Arnold Schwarzenegger.

Why is Michigan improving, but California isn’t? I think it’s because, during last fall’s election, businesses could look into the future. Snyder had an easy win and Michiganders thought he was serious about his pro-business reforms to create jobs. By contrast, Jerry Brown, who also had an easy win, was seen as a tool of the government-employee unions who paid for much of his campaign, and wouldn’t rock the status quo that has made California the most anti-business, anti-taxpayer state in the country.

After the election, that has been borne out. Brown is pushing a $12 billion tax hike, instead of serious pension and other reform.

Snyder, reports today’s Detroit News, is working to create jobs:

As other Midwest states face shortfalls in their upcoming budgets, Gov. Rick Snyder is charting an unusual path by slashing business taxes as a primary solution.

Snyder’s plan employs deep cuts to education and localities, like that of Wisconsin’s governor, but he’s distinct in proposing a generous tax break for businesses in hopes of spurring economic growth while increasing the tax burden on seniors’ pensions and low-income families.

Well, I don’t like increasing taxes on anybody. Basically he’s ending exemptions for public pensions, including Social Security. He should have just skipped that part.

Michigan’s top income tax rate, 4.25 percent, still will be less than half California’s top rate of 10.55 percent (under the Brown proposal). And it’ll even be less than half the second-highest California rate, 9.55 percent, which hits the middle class and kicks in at around $50,000 income.

Michigan has nothing like California’s jobs-slaughtering AB 32. And with the median price of a home well less than $100,000 even in some of the nicest neighborhoods, Michigan is set to take off.

Of course, the auto industry will tank again if gas prices keep soaring. Detroit remains an rusted-out hulk of a once-great city. And then there are those winters.

But at least Michigan is hitting the accelerator on economic growth. Gov. Brown has thrown California into reverse.

March 7, 2011

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