2006 Election Issues for Catholics:

Michigan Budget and Tax Issues

Statement of Issue: Michigan is locked in a structural budget deficit. Our present revenues simply will not pay for essential state services. Michigan incurred $7.8 billion in budget deficits from 2000 to 2005. The state's fiscal reserves were exhausted and programs were reduced by $3 billion to cover these deficits. In February 2005, the Michigan League for Human Services (MLHS) projected that an additional five billion in deficits will be incurred in the next decade. Although Michigan's weakened economy caused some revenue losses, incremental multi-year tax reductions beginning in 1999 are a large cause of our deficits--75 percent or $5.9 billion of the $7.8 billion deficit total as of 2005 according to MLHS. These cuts were in the Personal Income Tax and in the Single Business Tax.

Because Michigan's constitution requires a balanced budget, any deficit must be met with an equivalent reduction in services or increase in taxes or fees. Significant cuts were made in higher education ($297 million or 14% in just two years) and in revenue sharing with local governments ($396 million, 26%, over four years) according to the Citizens Research Council of Michigan. The state's workforce has also been cut by 14 percent, or 8,500 workers, to its lowest level since 1974.

New Threats:

A new "veto-proof" law initiated this year by a citizen petition with its roots in the Oakland County
administration, was passed this summer by the majority in the state legislature. It will eliminate the Single Business Tax (SBT) in January 2008, (scheduled for later elimination) thereby removing an additional $1.9 billion, approximately 25 percent of Michigan's annual general fund revenue. The new law's supporters claim that they will identify replacement revenue after the November election, but do not intend to fully replace the funds with business taxes. The only alternative will be to increase taxes on individuals or further cut programs. Contrary to some claims, Michigan is not a high tax state. A 2004 study by the Federal Reserve Bank of Boston estimates that as of 2000, Michigan's business tax rate ranked it 41st behind the highest among the 50 states. According to Robert Kleine writing for The Michigan Prospect in June, 2005, Michigan's business taxes declined from 20.7 percent of state tax revenues in 1986 to 10.1 percent in 2004.


The Stop Over Spending (SOS) initiative is obviously misnamed because Michigan is not overspending by any measure. SOS would, by constitutional amendment, limit Michigan from spending any more in a year than it had spent the prior year except for inflation and population growth. When tried in Colorado, a similar proposal had disastrous results on state programs, especially education. The Colorado program has largely been suspended but not before severe damage had been done.


How We Got There: Michigan has been part of the anti-government, anti-tax mania which has gripped the country since 1980. Racism also has been used by some legislative candidates to gain control of the state's policy/law-making process. These efforts converged with personal and group interests favoring small and weak government. Use of the Granholm-Kilpatrick relationship in the last election for governor is an example of how the "race card" gets played.

Church Teaching: The U.S. Bishops' 1986 letter, "Economic Justice for All," teaches that a tax system should be continually evaluated on these principles: first, it must raise enough revenue to pay for the needs of society, especially the poor; second, it must be progressive so that those with means bear the greater share of taxes as a "means of reducing severe inequalities of income and wealth."

Enlightened Action: In the short term the SOS initiative must be rejected and the Single Business tax must be replaced. Candidates for governor and the legislature should be challenged on whether and how the SBT will be replaced. Cutting taxes has not increased jobs in Michigan. Longer term, Michigan voters must decide what kind of state we want and elect candidates who want an efficient and effective government which will provide strong education, Our revenue must be increased. We tax many fewer services than our surrounding states allow too many tax expenditures. These increasing exceptions to the tax code now amount to more than 60% of potential revenue. Frame all discussions of tax issues in positive language. Publicize the true level of taxation in Michigan as being well below average and unfairly focused on the middle class and poorer citizens, that is, not progressive. Organize and promote active involvement in the election process.

 

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In agreement with the U.S. Bishops, Catholics are urged to vote for candidates “based on the full range of issues, as well as on the candidate’s personal integrity, philosophy and performance,” keeping in mind that “a Catholic moral philosophy does not easily fit the ideologies of ‘right’ or ‘left’, nor the platform of any party…Our responsibility is to measure all candidates, policies, parties, and platforms by how they protect the life, dignity and rights of the human person, whether they protect the poor and the vulnerable and advance the common good."8

“Most issues are moral issues. If we take moral issues seriously, we need to vote accordingly.”

– Bishop Thomas Gumbleton
Caucus Co-chair

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1. Statements from the publication “Faithful Citizenship: a Catholic Call to Political Responsibility,” US Conference of Catholic Bishops; concepts adapted from “Peaceweavings: Choosing a Presidential Candidate, Pax Christi, USA and the National Catholic Rural Life Conference.
2.David Kamin, tax and budget analyst, Center on Budget and Policy Priorities, by telephone, August 27, 2004
3. “Tax Returns: A Comprehensive Assessment of the Bush Administration’s Record on Cutting Taxes,” Center on Budget and Policy Priorities, April 2004
4. “Studies Shed New Light on Effects of Administration’s Tax Cuts,” Center on Budget and Policy Priorities, August 25, 2004, with data from the Congressional Budget Office Mid-Session Budget Review
5. “Assessing President Bush’s Fiscal Policies,” Mark M. Zandi, Economy.com, July 2004
6. “Gap Between Rich and Poor Widening in Troubled Economy,” by Leigh Strope, Associated Press, August 17, 2004
7.Economic Justice For All Pastoral Letter on Catholic Social Teaching and the U.S. Economy, National Conference of Catholic Bishops, November 1986, 202d. The U.S. Bishops’ election statement (Faithful Citizenship, November 2003) is silent on the matter of fair taxation policies that can generate sufficient revenue for basic needs programs.
8. Address of His Holiness Pope John Paul II to the Diplomatic Corps, January 13, 2003
9. See FN at 2
10.“Studies Say Tax Cuts Now Will Bring Bigger Bill Later,” The New York Times, September 23, 2003
11. Ibid
12. “Studies Shed New Light on Effects of Administration’s Tax Cuts,” Center on Budget and Policy Priorities, August 25, 2004; Robert Reischauer, Urban Institute, as reported in Newsweek, May 24, 2004
13. “The Unbearable Costs of Empire,” by Mark Weisbrot, Business Week Online, July 29, 2004; “This Can’t Go On,” by Paul Krugman, The New York Times, November 4, 2003, p. A29
14. Congressional Budget Office data; The New York Times, September 23, 2003, p. C2
15. “Tax Returns: A Comprehensive Assessment of the Bush Administration’s Record on Cutting Taxes, ” Center on Budget and Policy Priorities, April 23, 2004
16. “Studies Shed New Light on Effects of Administration’s Tax Cuts,” Center on Budget and Policy Priorities, August 25, 2004
17. Ibid, Table 1
18. See FN at 15; U.S. Treasury Department data
19. “Studies Shed New Light on Effects of Administration’s Tax Cuts,” Center on Budget and Policy Priorities, August 25, 2004; “Tax Returns: A Comprehensive Assessment of the Bush Administration’s Record on Cutting Taxes,” Center on Budget and Policy Priorities, April 23, 2004
20. “IRS Is Tightening Rules for Low-Income Tax Credit,” The New York Times, April 25, 2003
21. NETWORK, A National Catholic Social Justice Lobby, “Budget and Taxes,” Election 2004 Charts
22. “NO END IN SIGHT TO RISING DEFICITS, EXPERTS WARN,” Committee for Economic Development, Concord Coalition, Center on Budget and Policy Priorities, September 29, 2003
23. Ibid, Table 1
24. Ibid, Table 1
25. Ibid, Table 1
17. Ibid, Table 1


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