Dixon on the Budget: “I know what I don’t know”
Seven days until the polls close and economic experts are ripping the largest component of Tudor Dixon’s economic plan apart – her plan to slash the budget and jeopardize critical services.
The special interest backed candidate “absolutely” backs a plan that would gut $12 billion from critical services “as quickly as we possibly can.” Her “piss-poor policy plan” would slash funding for roads, public schools, and would eliminate the primary funding source for Michigan State Police, threatening to cut over $500 million per year in law enforcement funding.
While she claims she won’t cut funding for these critical resources, former House Fiscal Agency Director Mitch Bean was an “instant skeptic” of the idea, projecting “an immediate $1.6 billion hole” in the budget, and calling Dixon’s belief that cutting the income tax will bring more residents and companies the “silliest assumption.”
Experts know there’s “no guarantee” cutting the state’s income tax will bring more people to Michigan, but they do know it will gut funding for vital resources Michiganders rely on.
Take a look at the MIRS interview with Mitch Bean who goes through Dixon’s major economic plan that “doesn’t make any sense,” and the WLNS interview where Dixon admits she has no idea how she’ll fill the funding hole this will cause:
MIRS: Bean Says Dixon’s Income Tax Phaseout Will Never Happen
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Bean predicted that while the GOP candidate for governor is waiting for new businesses and citizens to relocate here, the state budget will need to be sliced before any economic growth would make up the sizable hole in the budget from an income tax phase out.
That first year, Bean projects to be an immediate $1.6 billion hole.
Building a budget with long-term economic growth as part of the foundation may not cut it, Bean said.
“Under any reasonable growth assumption, an eight-year plan would result in real negative real revenue growth as service costs rise with inflation . . . economic growth is not a guarantee . . . you wouldn’t have enough to pay for current services. You’d have to find cuts every single year for the next eight years. It doesn’t make any sense.”
During the last debate Dixon noted that nine other states without an income tax were well ahead of Michigan economics, but Bean indicates, “all of them have much higher-level sales tax rates, they rely heavily on taxes from national resources or from casinos and tourism or very high property taxes.”
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In 2012 and 2013, Kansas lawmakers cut the top rate of the state’s income tax by almost 30% and the tax rate on certain business profits to zero. Governor Brownback said his plan would be like “a shot of adrenaline into the heart of the Kansas economy,” stimulating strong growth in economic output, job creation, and new business formation.
“In reality, Kansas under-performed most neighboring states and the nation on all of those measures after the tax cuts – and the state’s bond rating suffered,” Bean said.
In 2017, the Legislature repealed the business tax cuts and moved income tax rates back toward where they had started.
In Michigan, the cut-and-cap on property taxes was supposed to do all sorts of wonderful things for the state economy, Bean said.
“It didn’t. And in 2012 we cut business taxes $1 billion (83%) and all sorts of wonderful things were supposed to happen – they didn’t,” he said.
“And the sponsors of literally 100s of state tax cuts have talked about the wonderful things they would do for the state economy – they didn’t,” Bean said.
If the Individual Income Tax (IIT) is phased out over eight years, the first-year impact would be about $1.6 billion – and increase each year thereafter because the base increases. And, under any reasonable growth assumptions, an eight-year phaseout would result in negative real revenue growth as service costs rise due to inflation.
WLNS: Is Dixon’s plan to kill the state income tax realistic?
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If enacted, Dixon’s plan would eventually reduce the state budget by $12 billion .
Of course, the big question is: how do you fill that hole? Dixon concedes she does not have the hands-on experience to make that call alone.
“I know what I don’t know as a leader and I plan on surrounding myself with people who do,” she said.
She explains that she picked former Rep. Shane Hernandez as her running mate because he chaired the House Budget Committee for two years.
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Dixon believes if you eventually eliminate the income tax, more jobs and workers will come into the state.
“If we reduce our income tax, it draws population and then we have a much bigger pool of taxes and will bring more corporations here,” said Dixon.
The former head of the non-partisan House Fiscal Agency in state government warns that while you are waiting for folks to relocate to Michigan, state services will have to be cut in the interim.
“You’d have to find cuts every single year for the next eight years. It doesn’t make any sense,” said former director Mitch Bean.
