Michigan, Where Do Our Tax Payments Actually Go?

I have had a lot of questions about taxes lately. So, I reviewed the State of Michigan’s Annual Financial Report prepared by the State Budget Office in comparison with the Budget Briefing: State Tax Revenue Overview which was prepared by the House Fiscal Agency. I did not like what I found.

The School Aid Fund has depreciated due to an exemption on property taxes for manufacturing and commercial property owners with assessed values of $80k or less. This exemption was established and approved by voters in 2018. The intent was to stimulate small business, encourage entrepreneurs, and invigorate Michigan economy by creating more jobs. Unfortunately, it has done the complete opposite.

Manufacturing and commercial owners have become negligent. They do not care about what does not cost them. Many businesses are inoperable, and many buildings have been abandoned. All these things contribute to blight, crime, and poverty and they continue to hinder opportunity for new entrepreneurial endeavors. In the meantime, property taxes for residential homeowners and landlords have increased drastically throughout the state in attempt to balance out the financial gap that has resulted from the exemption. In addition, a percentage of the State’s General Funds has been reallocated to local city governments, and a percentage has been reallocated to the School Aid Fund to help make up for the loss in property tax revenue.

There needs to be penalties and fines established for the non-tax paying commercial and manufacturing property owners that are not utilizing their properties productively. The residents of the communities that these properties are in should not be forced to pay for a legislative mistake that is negatively impacting their neighborhoods and personal property values.

The General Funds for General Purpose have also experienced depreciation due to losses in revenue of sales tax and income tax.

The State says they are not receiving as much money in sales tax as they could because of the increase in online sales. Under current regulations of interstate commerce, Michigan based businesses that sell items online and ship them to customers in other states are exempt from paying tax on those sales.

This is where the State needs to adapt to the current trends in society and include the use of technology in business affairs. As someone very familiar with small business, there is really no reason for exemption of sales tax for interstate commerce because the other costs specifically associated with those sales (such as the cost of telecommunications services and shipping and handling charges) are already tax deductible. If a product is made and sold from Michigan it should be subject to the regular state sales tax regardless of where it is being sold to.

In addition, revenue gained from the sales tax placed on tobacco has decreased as the rate of smoking has been steadily on a downfall.

While tobacco sales are decreasing, the prevalence of marijuana throughout society is growing at exponential rates both medically and recreationally. It seems more prudent now than ever for regulations to be put in place for the proper taxation on marijuana sales to be implemented and make up the difference.

The State says that the revenue they gain from income taxes has depreciated due to the increase in exemptions and fluctuations in withholding among wage earners. To combat this loss, they have imposed taxation on retirement income steadily since 2012, in alignment with annual inflation.

The State is not receiving the revenue that they should from income taxes because the rate of minimum wage has not been increased to align with inflation. Many low-working class families receive the exemptions that they do because their annual income still falls within the limits of the annually established poverty guidelines.

Anyone working 40 hours a week or more should not need State aid. However, they do because wages do not succumb to the cost of living. The fact that many people work full time jobs with overtime in Michigan and still qualify to receive State aid under the income poverty guidelines is exemplary of the prevalent wage disparity we have been experiencing.

Recently, many people who were unable to work during the coronavirus shutdown received more income through unemployment by receiving the federal stimulus of an extra $600 per week than they would have if they had stayed working at their regular wage.

The extra federal benefit of $600 in Michigan ended recently, and our Governor is among others across the nation begging and waiting on pins and needles for an extension to be approved and distributed through yet another federal stimulus package.

However, at the end of the fiscal year 2019, the Michigan Unemployment Compensation Fund was sitting at a positive net balance of $528.3 million, which demonstrates over a 13% increase from the previous year. The increase was due to a decrease in overall benefits paid and an increase on the interest earned from unemployment insurance payments made by employers. It was also recently discovered and announced that $2 million in Michigan unemployment funds has been embezzled by an independent contractor, hired by our State, who had access to the funds. Seems to me like a little more administrative direction and oversight is needed within Michigan’s UIA and Department of Treasury.

Retirement income should not be taxed because wages need to catch up with the cost of living. Minimum wage needs to be increased accordingly to a rate that will allow a full-time worker to provide for themselves without needing welfare. Those who are still actively working and earning a living would be capable of contributing more to income tax revenue if they were receiving proper compensation to begin with.

Moreover, the General Funds have decreased by an approved amount of an additional $600million annually in funding to be redirected to the Michigan Transportation Fund in support of the Governor’s initiative of “fixing the damn roads.” So far, her efforts have proved inefficient. After spending $3.8 billion on transportation improvements just this year, the current balance of transportation funds sits at about $1.3 billion and the Governor has proposals currently awaiting review to ask the federal government for legislative support and more funding to continue her efforts without any new ideas, plans, or strategies as to how she will proceed in doing so affordably and competently if her request is to be granted.

Our State is broke because our officials are not being fiscally responsible or prioritizing the actual needs of Michigan people over political interests and ideal media optics. Recently, the governor deemed racism as a public health issue and made a commitment to overcoming conflicts surrounding race by mandating implicit bias training. This means that even more money will be spent on training individuals, specifically state employees, on how to treat people with dignity and respect regardless of race and stereotypes. You would think that as persons hired to serve the people, being decent to other humans and advocating for human rights and equality would be a main prerequisite qualification to fulfill such a position.

What I find even more frustrating is that implicit bias training is offered to everyone, for free, by Starbucks and it is not a justifiable financial expense in the current climate of our State. It is accessible to the general public at www.tobewelcoming.com.

An acceptable alternative option, in my opinion, would be to work with the department of education to include coursework in diversity and pluralism for the general required curriculum, beginning at the college level and backtracking down to develop age-appropriate content for younger students in the K-12 setting.

I really despise politics and the senseless unreasonable injustices it perpetuates like THIS. The irony is, I would have to become a politician to place myself in a position with the opportunity to try and change any of it. The system is just straight bullshit!