Snyder settles for a single ( the Michigan View 04.13.11)

Posted by hpayne on April 13, 2011

The Nerd is learning to play politics. On Tuesday, Governor Snyder listened to his Senate first base coach and took a safe single rather than trying to stretch a double. A pity he never tried to swing for the fences.

The line score of this week’s budget game (featuring Republicans vs. Republicans) will credit Team Snyder with a savvy political victory with the Nerd determining that Michigan’s middle class would scream less about a personal tax hike to 4.35 percent than would the senior lobby about losing their generous pension reduction. A survey of key Lansing players suggests Snyder just assured that his budget will pass.

But in so doing, Republicans have squandered a historic opportunity to win bold reform of Michigan tax and labor policies.

Don’t get me wrong, the Snyder plan is a vast improvement over eight years of failed Granholmnomics. But by defensively backpedaling from reducing the personal income tax rate – while slashing corporate taxes – Republicans have just confirmed the stereotype that they are the Party of Big Business. At a time when the GOP has the Lansing playing field to itself – the result of huge electoral majorities – it is negotiating ITSELF out of reinventing tax cuts and Big Labor savings.

“The plan continues the elimination of the jobs-killing Michigan Business Tax and ends the double taxation on small businesses,” reads a Snyder press release. Spoken like Snyder the conservative businessman. But Michigan could have benefited from Snyder the risk-taking entrepreneur. Businessmen large and small will bless replacing the unsavory dog’s breakfast of the Michigan Business Tax they’ve been forced to eat. That’s good for a jobs-starved state.

But what about individual taxpayers still burdened with paying expensive state employee union costs?

“Snyder has missed a chance to broaden the tax base, lower the rate, right-size employee benefits, and make it harder for the senior lobby to complain,” says Leon Drolet, Chairman of the Michigan Taxpayers Alliance, the state’s largest pro-taxpayer group. “He would have made (former Gov.) Engler jealous. Now he’s just struggling to make a double.”

Indeed, the state Democratic Party quickly pounced on the opportunity calling the GOP compromise “a fresh coat of paint on the same plan to balance the budget on the backs of seniors, working families, and students while giving billions away to big corporations.”

Snyder appears to be aware of the problem at least. “Upon passage of this plan, Michigan will have the 14th best income tax,” his press release adds, “and the 8th most generous treatment of retirement income – among states with income taxes.”

“We’re Number 14!” Not very catchy is it?

Alas, Snyder’s compromise veers off the admirable flat tax course he first championed. He was abandoned by GOP legislators spooked by angry seniors with generous pension exemptions. But instead of pushing Snyder to act on his conservative impulses to enact a true flat tax by cutting rates and closing loopholes, Republicans backpedaled. There are no Paul Ryans or Chris Christies in this crowd. “Moderate” Rick Snyder, it turns out, is the right-wing alternative.

Now, Snyder’s flat tax has loopholes that read like this: “The new proposal would exempt those aged 67 and older from the pension tax. For people 60 to 66 years old, the first $20,000 would be exempt for an individual and the first $40,000 for a couple. Pensions would be taxed at the full rate for retirees aged 59 and younger. But once any Michigan resident turns 67, income exemptions of $20,000 for individuals and $40,000 for couples would apply.”

That’s simplified taxation?

To make up for the lost pension revenue, Snyder now finds himself with another $150 million in cuts to make. Though unspecified, these cuts, sources say, will be across-the- board nicks – $20 million in corrections here, $20 million in community colleges there. Missed will be another golden opportunity to address union fat cats who continue to enjoy pay and benefits well beyond private sector employees who pay their ticket.

While Mr. Nice Guy has tried to avoid union confrontation, the playing field around him has changed dramatically. Unions have turned on Snyder anyway, protesting his proposed cuts as well as his tough new financial manager rules. Meanwhile, Wisconsin, Indiana, and Ohio – Midwest competitors all – have blown past Snyder with transformative collective bargaining reforms. Snyder must get serious about unions if he is to make structural changes to Michigan’s budget.

Those changes may still come. But for now, Snyder is content to beat out groundballs rather than bit home runs. “Michigan doesn’t just need a new model with tweaked headlights,” says Drolet, switching to another favorite Detroit analogy, autos. “We need a new model.”

Henry Payne is editor of The Michigan View.com.

 

Comments are closed.