Required Reading

In today’s op-ed section, The Wall Street Journal has a fine piece showing what happens when politicos get addicted to raising taxes. The black hole is, of course, Michigan.

It’s no fun to kick a state when it’s down – especially when the local politicians are doing a fine job of it – but the latest news of Michigan’s deepening budget woe is a national warning of what happens when you raise taxes in a weak economy. (Any emphasis mine.)

Officials in Lansing reported this month that the state faces a revenue shortfall between $350 million and $550 million next budget year. This is a major embarrassment for Governor Jennifer Granholm, the second-term Democrat who shut down the state government last year until the Legislature approved Michigan’s biggest tax hike in a generation. Her tax plan raised the state income tax rate to 4.35% from 3.9%, and increased the state’s tax on gross business receipts by 22%. Ms. Granholm argued that these new taxes would raise some $1.3 billion in new revenue that could be “invested” in social spending and new businesses and lead to a Michigan renaissance.

Not quite. Six months later one-third of the expected revenues have vanished as the state’s economy continues to struggle. Income tax collections are falling behind estimates, as are property tax receipts and those from the state’s transaction tax on home sales.[...]

Politicians don’t seem to understand that people and their personal capital are mobile and dynamic. After awhile, people just get fed up and leave. Michigan is a case in point.

he tax hikes have done nothing but accelerate the departures of families and businesses. Michigan ranks fourth of the 50 states in declining home values, and these days about two families leave for every family that moves in. Making matters worse is that property taxes are continuing to rise by the rate of overall inflation, while home values fall. Michigan natives grumble that the only reason more people aren’t blazing a path out of the state is they can’t sell their homes. Research by former Comerica economist David Littmann finds that about the only industry still growing in Michigan is government. Ms. Granholm’s $44.8 billion budget this year further fattened agency payrolls.

There’s another national lesson from the Granholm tax dud. If Democrats believe that anger over the economy and high gas prices have put voters in a receptive mood for higher taxes, they should visit the Wolverine State.

Just a few weeks ago taxpayer advocates collected enough signatures in suburban Detroit for a ballot initiative to recall powerful Speaker of the House Andy Dillon, who was one of last year’s tax-hike ringleaders. Voters seem to think there would be rough justice if for once politicians, rather than workers, lose their jobs from higher taxes.

The sad part is, even if Dillon did get recalled, he would be replaced by someone equally inept and stupid.