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Step 3: Creating a Competitive Business Climate

Monday, Apr 30, 2012
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Step 3 of the MTP focuses on creating a competitive business climate. In 2011, state leaders made tremendous progress in this area when they enacted the most comprehensive reform to Michigan’s tax structure in over two decades. In replacing the Michigan Business Tax with a flat corporate income tax, policy makers made Michigan’s tax environment more competitive by simplifying Michigan’s primary business tax and ending the practice of double taxation on hundreds of small businesses.

In fact, according to the Tax Foundation, a non-partisan tax research group based in Washington D.C., as a result of this change Michigan now has the 7th most competitive corporate tax environment nationally. This represents an incredible improvement over Michigan’s previous rank of 49th in this category.

Still, in the same index, Michigan ranks below many of its competitors in areas such as Property Taxes and Unemployment Insurance Taxes. And our regulatory environment ranks 43rd nationally according to Pacific Research Institute, a non-profit free market think tank located in San Francisco. We must continue to improve in these areas to compete nationally and globally for jobs, economic and personal income growth. Going forward, Michigan should take the following actions:

  • Phase out the Personal Property Tax without adversely impacting those communities that are overly dependent on Personal Property Tax revenues;
  • Create a responsive, collaborative regulatory system that includes aligning Michigan’s regulatory requirements with national standards;
  • Provide a seamless, one-stop process for business growth that aligns state and local site development and business regulations;
  • Create a modern, cost-effective incentives program;
  • Strengthen Michigan’s workforce by fostering a frictionless workforce; environment, matching education and training supply with workforce demand, and attracting and retaining skilled immigrant, mid-career and young talent; and
  • Increase capital availability.

Some will point to states like California and Massachusetts and say that the lowest tax states don’t always win. It’s true that companies compare the total cost of doing business against a region’s assets when evaluating site location decisions. Some regions of the country such as the Silicon Valley of California and the Boston areas in Massachusetts, have been able to attract and keep industries in high-tech and related fields because those businesses perceive the value provided in those regions, whether it’s the of quality of life, access to capital, or highly entrepreneurial, highly skilled workforces, as sufficient to mitigate the higher cost of doing business. While Michigan has made important strides to improve our cost-value proposition, businesses don’t yet perceive Michigan’s assets as valuable enough to offset our higher cost structure. 

In our next blog, we will look at how the state can provide greater value by investing in key areas that will promote future growth.

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