Even though I support Michigan Governor Rick Snyder in his plan to fix Michigan
There is no question that Michigan’s business tax structure is complicated to the extent that it scares new businesses from locating in the state (that and unionism) and he has promised to simplify the tax structure by instituting a single tax on revenues of “C” corporations of 6%.
In doing this, Snyder will suffer a 1.8 Billion shortfall from business taxes which he plans to make up by cutting exemptions and spending. He has been told by business leaders that this business tax cut would help businesses hire more workers and reduce the unemployment figure in the state.
I don’t totally buy that.
Of course businesses will say anything to get a tax cut but will a tax cut encourage them to hire more workers…usually only larger sales and therefore a need for more production workers will.
You may then argue that the tax cut could give businesses the extra money to hire more salesmen or do more marketing which will in turn, bring in more sales and therefore a need for more production workers?
If you look at the economy from the “demand side” which means people buying more will spur businesses to make more and thus hire more and thus improve the economy, you may say that the more money in people’s pockets, the better for business.
But if you look at things from a “supply side” point of view you may buy into what I said about businesses having more money to spend on sales/marketing will spur more buying. BUT if the consumer does not have the money to buy than all the marketing in the world will not get them to buy unless credit is available but in this day and age, many consumers are scared about taking on more credit.
I guess we can go round and round in this debate but getting back to Snyder’s business cut, he will be financing the 1.8 Billion shortfall from lower business taxes by taxing pensions, cutting money to education, cutting exemptions…all actions that will, in one way or another, mean less money in people’s pockets and therefore less money to buy stuff with.
In my case (medical laboratory sales), the more people employed, the more people with health insurance, the more people seeing their doctor, the more sales for me so higher employment is good for my U.S. business and could get me to hire more workers.
If Snyder’s budget plan goes through and is enacted in 2012 and unemployment falls dramatically some time after that, his plan worked. If not, back to the drawing board.
I do believe that cutting waste and unnecessary and unjustified spending can only help the state deal with the really important expenditures it needs to make.
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