07/01/2008
Last week the Legislature finished up the 2009 budget and recessed until September. Since they will be out of Lansing for a while to campaign for reelection (those that are not term limited), we decided to check in with NFIB/Michigan State Director Charlie Owens for an overview of the 2008 legislative session thus far and a peek at what lies ahead for small business in Michigan:
NFIB/Michigan: So the Legislature actually balanced the state budget on time and without any new (major) tax hikes for a change, should members phone them and say "job well done!"?
Owens: They should definitely phone them, but I would not suggest they be given any kudos for doing what they were hired to do in the first place. Actually they still have two of the toughest budgets left undone -- K-12 and local government revenue sharing, which are the only budgets that really needed to be done this early. Besides, how could you NOT balance the budget after more than $1.4 billion in tax hikes last year?
NFIB/Michigan: Whoa! Being a little tough on our elected officials aren't we?
Owens: Not at all, their performance in both the 2007 and 2008 session up to now has been nothing short of abysmal. In my 24 years of working at the Capitol for small business, I have not seen a worse performing Legislature or governor.
NFIB/Michigan: Isn't that just one man's opinion? Is it fair to blame lawmakers for the bad economy and many other factors that are outside their control?
Owens: It isn't just my opinion, you can ask any seasoned lobbyist or public policy professional in this town and they will tell you the same thing -- at least privately. Even the renowned think tank the Mackinac Center did a brief piece that questioned whether or not this Legislature is the worst in Michigan history. You can look at it online. You can also look at the numbers. Michigan lags the nation in almost every metric of economic health: foreclosures, bankruptcies, population loss, unemployment etc. You get the picture.
NFIB/Michigan: Now wait a minute, the state said they needed that money to avoid deep cuts in social services and other programs and that they had cut the budget "to the bone" and there was nothing left to cut. Are you saying that isn't the case?
Owens: They don't even know where the bone is. They refused to even look at many sacred cows of spending. Most major departments view a decrease in the amount of their expected increase as a "cut." No business could get away with that. While small businesses are laying off employees and cutting benefits, the state continued with a three year deal to increase state employee pay to the tune of about $300 million. And don't even get me started on the schools and higher education. Lastly, look at all the new spending rolled out in the governor's state of the state address after they got their huge tax hike. Cut to the bone? Give me a break.
NFIB/Michigan: OK, it isn't pretty, but we ask again, is it fair to blame lawmakers for the bad economy and many other factors that are outside their control?
Owens: While there are some factors that lie outside of the Legislature's control (declining domestic auto industry, global competition etc.) there are many more that are within their purview to influence, and they have simply dropped the ball in dealing with them. In addition, they have made matters worse by exacerbating an already deteriorating situation with many of the policies they have pursued. Finally, as regards the "national" economic picture, the rest of the country is just now experiencing choppy water on the economic front -- in all the years leading up to now only Michigan has been in the dumps so the "other factors" excuse doesn't wash.
NFIB/Michigan: Come on, be specific, you said that lawmakers dropped the ball in dealing with many issues within their control and that they made matters worse by exacerbating the situation, give us some examples of what you are talking about.
Owens: OK, let's start with that $1.4 billion tax hike I mentioned. Does anyone really believe that hiking taxes to that extent is going to help us out of the rut we are in economically? Then look at the new Michigan Business Tax (MBT). By any measure, this tax is worse than the one it replaced and that is why we did not support it. It is only because we fought for and got some "safe harbors" for small business that it isn't a total bust. We will be working to get the kinks and unintended consequences out of this tax for the next 30 years. Then, to duck out of a botched attempt on a services tax, they surcharged the MBT 22 percent! As if that wasn't bad enough, they continue to pursue proposals that heap paperwork and regulation on business at the worst possible time -- during a struggling economy.
NFIB/Michigan: Now wait a minute, lets be fair, didn't the business community support the 22 percent surcharge to get rid of the services tax?
Owens: Yes, SOME business groups, in the business community DID support the surcharge. We were not a party to that, we opposed the surcharge.
NFIB/Michigan: So you would have rather seen the services tax go into effect?
Owens: Remember, that we were part of an ongoing petition drive to repeal the services tax, and it would have succeeded if it had been allowed to continue. Yes, it would have been tough for many businesses to comply with the new services tax during the time between its effective date and the ballot repeal, but it would have eliminated the tax WITHOUT replacement revenue. I also believe that it wouldn't have come to that anyway as lawmakers would have repealed the services tax when they stared down the barrel of campaigning for reelection alongside a ballot initiative that would remind voters of their blunder all the way to November. Instead, some of the business groups in Lansing blinked, and folded their cards, giving lawmakers the out they were looking for to avoid the wrath of the voters for passing the services tax. After the surcharge was implemented and the service tax repealed by the Legislature it became apparent that they never needed the money in the first place. It was all additional spending.
NFIB/Michigan: You said you were working to get the kinks and unintended consequences out of this tax (MBT), what are you doing?
Owens: Our first priority is to get some relief from unintended consequences, such as the definition of gross receipts that includes taxes and fees that businesses collect for the state. In other words sales taxes, bottle deposits, tobacco taxes, etc. collected by a business for the state are being included in their gross receipts base and they are being taxed on those taxes.
NFIB/Michigan: How is that going?
Owens: Senate Bill 1038 that would correct most of this problem passed the Senate was changed and voted out of the House before they left for the summer. However, the "price tag" in terms of lost revenue to the state for correcting the issue is about $150 million. The budget they balanced before leaving for summer recess did not include this item, so the fight will be "how to pay for it".
NFIB/Michigan: Any suggestions on where to cut the budget or otherwise find the money to pay for this change in the MBT?
Owens: Yes, repeal that ridiculous handout to the movie industry that cost about $130 million in the 2009 budget. That would fund most of it. By the way, the movie tax credit fiasco makes my point about the abysmal way this Legislature has conducted itself in areas of tax policy. Giving away the store to a narrow group of taxpayers at the expense of those who have been here year in and out supporting our state with jobs.
NFIB/Michigan: You also said they made matters worse by pursuing proposals that heap paperwork and regulation on business at the worst possible time -- some specifics here, please?
Owens: I will give the Legislature a break for a moment and direct my comments to our esteemed governor. While businesses in this state struggle to make ends meet, a regulatory agency under her direct control, MIOSHA (Michigan Occupational Safety and Health Agency) plods along developing a sweeping mandatory ergonomics mandate on every business in the state. She seems content to let organized labor run the table on the rules process and foist this unneeded paperwork nightmare on Michigan business. Only Michigan and California would have this rule and Michigan's proposed version would be the tougher of the two.
NFIB/Michigan: So it's all the governor's fault, no paperwork and regulation on business from the Legislature?
Owens: I wish that were the case, but there is plenty of blame to go around. While they couldn't manage to get a budget out on time last session, they seemed to have plenty of time to debate who could use your bathroom, when you can use your cell phone, what employees you can hire (Michigan only unless you have a union workforce), how much water you can draw from your own well -- you get the idea. All of these bills and proposals would require small business to create paper and processes to please the state with little to show for it in terms of improved business climate. The list goes on; these are just a few examples. This is why we supported the petition drive for a part-time legislature -- the devil finds work for idle hands. Let me add that even though our efforts fell short of the necessary signatures to get it on the ballot, NFIB was the only state-wide business group in this town that had the guts to step out and support that effort.
NFIB/Michigan: So is it the Democrats that are causing all of this mayhem?
Owens: Not so. You may have noticed that I did not once tag any party as the source of these bad ideas and actions. While there are individual lawmakers that standout and have tried their best to do a good job in Lansing, as a group, both parties have performed badly. Both are responsible for this mess.
NFIB/Michigan: So if an NFIB member business owner did want to call their state Senator or Representative over the summer recess what would you suggest they say?
Owens: Ask them to repeal that handout to the movie industry and use the money saved to fund SB 1038 to remove sales taxes from the MBT. Let them know that you will be looking out for NFIB's 2008 Voting Record (we are working on it right now) to see how they did in looking out for small business. Let them know that as a group (Legislature) they have been a disappointment and that you expect better of them in what's left of this session.
NFIB/Michigan: It all sounds pretty discouraging; can you leave us with anything positive?
Owens: It can be discouraging. However, I do want to end on a high note. Things would be even worse if it were not for the small business members of NFIB giving these folks a reality check. The Legislature and both parties have lost their way. They have forgotten why they were sent to Lansing. What they lack in experience they seem to make up for with arrogance. NFIB and its small business members serve as a lighthouse, a guard rail, a roadmap back to what they should be doing. Not just for small business but for all Michigan citizens. Stay tuned for our Voting Record and use it to make decisions on which lawmakers you will support in the upcoming elections. Hold them accountable. Together we can get Michigan back on track. NFIB members are the glue that holds this state together during these difficult times and I am proud to be representing them here in Lansing.
