Michiganders need relief
Hilary Doe (Founder / President, Scout Institute)
Bryce Liedtke (Policy Director, Scout Institute)
The COVID-19 pandemic has ripped a massive hole in our state’s budget, left hundreds of thousands of people unemployed and thousands of small businesses hanging on by a thread. Unemployment rose in November for the first time since April following an increase in COVID-19 cases. Even as a vaccine, made right here in Michigan, is being distributed to frontline workers across the country — small business owners are starting to lose hope.
For months, nearly 19,000 small business owners waited to submit applications to the Pure Michigan Small Business Relief Initiative. For many, this was a last chance to keep their business afloat. It took only seconds for requests to exceed available funds when applications opened on Dec. 15. The $10 million in funding secured through the CARES Act could only provide 650 of the 18,700 applicants the program’s maximum $15,000 grant.
It would require another $280.5 million to provide full grants to the remaining small business applicants. While sizable, Crain’s own Chad Livengood noted Michigan gives away over double that amount in MEGA tax credits each year. Mostly to big business.
For years, the legislature has been offering big breaks to Michigan’s richest residents and biggest corporations instead of putting money in the hands of working people and small business owners. Even now, the Republican-controlled Legislature continues to prioritize rich corporations over small, local businesses. Instead of working with Gov. Gretchen Whitmer to pass the $100 million relief package she is championing, the legislature is spending the lame-duck session pursuing a $250 million tax break to help large corporations avoid unemployment insurance contributions. After years of tax cuts for the rich and big corporations, our small businesses and communities have been left behind.
It’s part of a larger trend. Michigan’s unfair tax structure allows the state’s wealthiest 1% to pay less of their income in state and local taxes than 80% of our families. Even before the pandemic, corporate taxes had dropped 52% since 2008, meaning there’s $1 billion less in revenue to invest in our communities each year. And since the start of the pandemic, Michigan’s billionaires have gotten tens of billions of dollars richer, while small businesses and hardworking Michiganders have been left to fight over scraps.
Those cuts and the lack of investment in our people has a real impact. It’s left schools underfunded, with our kids in one of the only 13 states with declining literacy. It’s allowed the state’s flagging infrastructure to fall to a D+ rating. It’s driven Michigan to 15th highest in income inequality among all states. And Michigan’s real median income has fallen from 16th in the country in 2000 down to 35th in 2019.
There is a better path forward.
We can close tax expenditure loopholes and reinvest billions in support for Michigan’s small businesses and families. We can levy an excess profits tax on corporations that have profited off the pandemic and pass the earnings on to Michigan small businesses, struggling to hang on. We can reform the corporate income tax to prevent tax avoidance by high-earning pass through entities. And we can reverse the trend of disinvestment in our children and our infrastructure by finally overturning the flat tax requirement in Michigan’s constitution on the 2022 ballot. Introducing a fairer income tax system removes the cap on our ability to invest in the future, by requiring the richest Michiganders to pay their fair share.
“Trickle down” never works. Building economic power from the ground up does. We must prioritize recovery for everyone. We must create a future where Michiganders can keep the lights on and keep food on the table. And it’s absolutely vital we invest in our communities to fuel growth in Michigan’s already struggling economy, right now.
We can and must do better.
Check out a complete list of revenue options available to support Michigan's people and communities.