Wayne State University

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From the Vice President

February 28, 2017

By Patrick Lindsey

"To Tax or Not to Tax"

The Michigan House of Representatives recently considered HB 4001, a bill to eliminate the state’s income tax.

As a taxpaying citizen, my immediate reaction was one of great interest; any bill that will put more of my money back into my pocket sounds good to me. However, after having read and analyzed the bill, I was much less enthusiastic.

While varying versions of this bill would be hashed out by the Legislature, the underlying fact is that a rollback in taxes equals a loss of revenue. In one version of the bill, the loss of anticipated revenue totaled nearly $2 billion by October 2018. Such a deep cut in the budget would necessarily affect schools, roads, community colleges and public universities, and local government revenue sharing.

Along with Michigan’s 15 public universities, Wayne State encouraged state representatives to thoughtfully consider all the consequences before voting on HB 4001.

If the past is precedent, a tax cut of this magnitude would result in especially deep cuts to higher education:

* In 2000, Michigan invested $1.50 billion in university operating support. Adjusted for inflation, that was $9,387 in state support per student.

* In 2016, we invested $1.36 billion. That’s $5,217 per student. This equates to a 44 percent reduction.

State investment in higher education is critical to ensuring college affordability, enabling Michiganders to achieve a postsecondary education, to achieve a middle class living, and to contribute to the state’s economy. Further disinvestment in state university funding will shift the burden of paying for college to students and families, through higher tuition prices.

It is notable that lawmakers in Kansas—who have strived to make that state the showcase for demonstrating how state tax cuts drive economic growth—earlier this month passed an income tax increase that will generate $2 billion to offset the huge revenue shortfalls that have devastated that state's public services in recent years. Tax-cutting to drive economic prosperity is a losing proposition.

Michigan lawmakers have made tough choices over the past six years, resulting in a sustained period of economic growth and gradual reinvestment in higher education (although, collectively, the state universities are still below FY 2011 funding levels). We are on a positive path toward our future and we can't afford to take a wrong turn now. Now is the time to invest in our people—our talent pipeline—and in our infrastructure.

While having more money back into my pocket sounds good, I am far more interested in lawmakers more effectively utilizing the tax revenues the state currently receives to make our state grow and thrive. To me, that sounds even better.

Editor’s Note: After a 12-hour marathon session that went until 1:30 AM Wednesday morning, the House voted down a pared down version of HB 4001.

 

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