Report: Michigan losing ground, could raise taxes to provide more services

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(The Center Square) – The Citizens Research Council of Michigan released its final paper on how to make Michigan prosper by increasing population.

The five-part series found Michigan is losing ground in the nationwide competition to attract and retain residents, counting statistics from demographics, economy, workforce, health, infrastructure, environment and public services.

The final paper focuses on the fiscal health of Michigan’s state and local government sectors. The series has found Michigan is suffering from stagnant population growth, brain drain, a shrinking workforce, declining health of its people and increasingly outdated infrastructure.

A previous report estimated 270,000 more people will leave the state by 2050.

Michigan’s infastructure is worse than the national averages, which hurts resident retention through frequent and long power outages, rough roads and outdated water systems, according to the report.

“Michigan is a low tax state,” CRCM President Eric Lupher said in a statement, noting that Michigan’s state and local tax burden in 2022 was 46th among all states and has a combined state-local effective tax rate of 8.6%, lower than all but two neighboring states and significantly below the 11.2% national average.

“Being a low-tax state can be a benefit, but only if the state is also attracting residents and providing desired services at the state and local government level, Lupher said. “Low taxes have reduced funding for key services, while the menu of public services offered has increased over the last three decades.”

The report found Michigan’s operating budget dropped by $3 billion between 2000 and 2010 – nearly 30%.

“Between 2000 and 2010, the state’s general operating budget declined by $3 billion, almost 30%,” CRCM Senior Research Associate Robert Schneider said in a statement. “This resulted in drastic cuts to public services and institutions, constrained government funding and scarce public investments to make Michigan a destination for people and businesses. It was a period of economic decline.”

Michigan is in the bottom third of national rankings in key statistics, including 34th in household income, 36th in K-12 educational outcomes, 39th in health outcomes, 45th in electric service reliability and 47th in road condition.

“A healthy, functioning government sector is the common thread to addressing many of these challenges by structuring its revenue and spending to invest in Michigan’s people, drive the economy and create places where people want to live,” Schneider said.

Schneider said while state revenue has since grown, Michigan general fund revenue for the next fiscal year is projected to be 25% below 2000 levels, adjusted for inflation.

The paper says that governments, often primarily funded by property taxes, would benefit from a diversified revenue model such as full funding of state revenue sharing that could fund enhanced public services that improve quality of life.

The paper provides an in-depth look at government revenue sufficiency and how service delivery can be improved to invest in Michigan’s people, education, infrastructure, public transit, and public safety. It also discusses opportunities to create sustainable models of funding local and regional governments, enabling them to provide more desired services.

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