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Surprise! Tax Cuts Won’t Grow The Economy

On the heels of Governor Rick Snyder’s State Of The State address this past Thursday, where he played coy over what he intended to do with Michigan’s estimated $970 million surplus over the next three years, a new report shows that tax cuts, especially in Michigan, won’t grow the economy.

  • The Congressional Research Service studied 65 years of federal tax and economic data and concluded that top income tax rates have had no discernible impact on economic growth.4
  • Studies of the impact of state personal income tax levels on economic growth are particularly likely to find no economic benefit from lower taxes.

Supporters of a personal income tax cut try to justify it as a way to help low- and moderate-income families who were negatively affected by the tax shift of 2011, which cut business taxes by 83% and increased taxes on many low-income workers and retirees, including a 70% cut in the Earned Income Tax Credit for low-wage workers.

In fact, most of the benefits of a cut in the state’s personal income tax from its current level of 4.25% to 3.9% would flow to Michigan’s wealthiest taxpayers, at a time when inequality and poverty are already high.

Oh, what to do, what to do?

“Let’s be smart about it,” Governor Snyder said. “I believe there is going to be some opportunity for tax relief. And when I talk about tax relief, the people that come to mind are those hardworking Michiganders who wake up every day and pack their lunch to go to work.”

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From Public News Service

Karen Holcomb-Merrill, policy director, Michigan League for Public Policy, said across-the-board tax cuts only serve to drain resources from the very programs and services that fuel economic growth.

“A good education system, good strong communities and public safety, good roads and good bridges- that’s what we need to grow our economy here in Michigan, not income tax cuts,” Holcomb-Merrill said.”

So, expect more tax cuts for those hard-working Americans in Michigan’s millionaire-tax-bracket paid for on the backs of teachers, students, crumbling infrastructure and pensioners.

Because nothing says “fiscal responsibility” like concentrated wealth.