The Michigan state capitol in Lansing at dusk by Carol M., licensed under CC.
Earlier this week, Michigan Democrats introduced House Bill 6217, legislation raising the Michigan corporate tax rate from 6 to 8.5%. Beginning next year, Michigan may have one of the highest corporate rates in the nation.
With this new adjustment to their tax system, they would be ranked among the greats, like Minnesota, Illinois, and California – states, as we are well aware, that businesses are not evacuating wholesale for Texas, Florida, South Carolina, and Georgia, all of whom just so happen to have much lower corporate tax rates.
This proposal, of course, comes at a time when Americans are most concerned about inflation – it’s one of the major things that won Trump, and Michigan Republicans, their respective elections.
Studies have shown time and time again that corporate taxes increase the price of goods. The rationale is quite simple, so simple, actually, that it makes one question the necessity of said studies: Any cost on a business has to be paid for. How do they pay it? By increasing prices or slowing wage growth and employment for their workers. Unless you’re delusional, neither outcome is particularly desirable, and most of the time, so as to distribute the burden of the tax equally, a little bit of both happens. According to research from the Tax Foundation, a whopping 70% of the cost of the corporate tax rate is borne by workers.
Of course, the effects are even worse when one considers that it’s a state level tax. Unlike federal taxes, which apply to everyone equally, a state tax solely applies to businesses within Michigan. Any business, then, could easily avoid it – by moving to another state. Indiana, a mere bus ride away, has a corporate tax rate of 4.9%. A company can easily get a better tax rate than before, simply by moving their operations there.
Democrats, as nonsensical as their beliefs can be, are not delusional. They know the negative effects of this tax increase. That’s why they never once proposed this idea, despite having an entire term to do so, until this week.
Only now, now that they lost, can Democrats unfurl this ridiculous tax bill – one last ludicrous hurrah before the end. If it passes, they don’t have to suffer the consequences. If it doesn’t, it’s no skin off their back. Republicans, on the other hand, have been placed in a lose-lose position. Either the bill doesn’t pass, and Democrats have another platform from which they can launch attacks, or the bill does, and Republicans will be forced to repeal it. Either way, Dems get a free talking point.
And, on the off chance that Republicans don’t repeal the bill, they will of course be considered liable for any resulting economic horror shows.
Luckily, by attempting to pass this bill now, Democrats have given away the game. It’s up to Republicans, and the Michigan public, not to let them get away with such a cynical ploy.
