Jennifer Granholm on Tax Reform Democratic Governor (MI)

2003: GOP tax policy based on unimaginably rosy assumptions

Then the inevitable downturn would come. The boom-or-bust cycles were exasperating, but Michigan was unfailingly resilient.

The latest economic downturn had a new twist. Republicans who controlled things around here for a decade effectively built a new state tax structure-- and built it when economic conditions were at their peak and with economic assumptions that were unimaginably rosy.

On top of the rosy assumptions, they also adopted more tax cuts that will roll in automatically over the next few years, with no offsetting revenue increases to pay for them. The business tax rate is scheduled to drop each year until business taxes go away altogether.

Lower taxes DID create jobs, but not necessarily in America

To be clear, the cuts DID create many jobs--but not necessarily in America. Michigan's tax cuts, and those championed by Pres. George Bush at the national level, freed up capital for investors and companies. But much of that capital was being investigated far from Michigan and away from our country altogether.

The corporate and personal income tax burden in Michigan during 1999-2009 fell more than in any other state in the country--from 12th highest to 39th in the case of state and local taxes--yet people and businesses were still exiting our increasingly inexpensive state.

$12B in federal economic stimulus as state block grants.

The nation's governors urge you to include state countercyclical funding as part of your legislation to stimulate the economy. This would include $6 billion in Medicaid assistance by freezing scheduled federal FMAP reductions and increasing all states' F Congress approved $20 billion in assistance to states, including $10 billion in Medicaid and $10 billion in block grants. The governors' current stimulus proposal is essentially the same, with the exception that it is a total of $12 billion as opposed to $20 billion. This proposal can be enacted quickly, as there is precedent and it is timely, temporary and targeted.

Additionally, governors appreciate federal efforts to use tax policy to get additional money into the hands of consumers and businesses to stimulate the economy. When considering tax changes to spur economic growth, governors urge Congress and the Administration to follow the maxim of "Do no harm" by avoiding changes at the federal level that would diminish state tax revenues or force state actions that would undermine the effectiveness of federal efforts.

We look forward to working with you to enact the appropriate stimulus program.