michigan’s comeback: where do we stand, where are we heading? robert genetski website:...
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Michigan’s Comeback: Where Do We Stand, Where Are We Heading?
Robert GenetskiWebsite: ClassicalPrinciples.com
West Michigan Policy Forum
Outline
1. Michigan’s comeback2. Economic freedom and growth3. Characteristics of best performing states4. Characteristics of worst performing states5. Michigan’s policy mix6. How Michigan can become a top performer
Outline
1. Michigan’s comeback2. Economic freedom and growth3. Characteristics of best performing states4. Characteristics of worst performing states5. Michigan’s policy mix6. How Michigan can become a top performer
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20143.1
3.4
3.6
3.9
4.1Michigan Employment: Private Sector Jobs
Millions of jobs
Private Sector Jobs
Source: US Bureau of Labor Statistics; classicalprinciples.com
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 201419%
20%
21%
22%Michigan Share of Great Lake States Jobs
percent
Source: US Bureau of Labor Statistics; classicalprinciples.com; Great Lake States: MI, WI, IL, IN, OH
Private Sector Jobs
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20142.9%
3.0%
3.1%
3.2%
3.3%
3.5%
3.6%
3.7%
Michigan Share of US Jobs
percent
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
Private Sector Jobs
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014300
325
350
375
400
Michigan Personal Income
Billions of dollars; fiscal years
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 201419%
20%
21%
22%
23%
Michigan's Share Great Lakes States Income
percent
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2.5%
3.0%
3.5%
4.0%
Michigan's Share of US Income
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
percent
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20144
5
6
7
8
9
10
11
12
13
14
15Unemployment Rates
percent
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
US
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
Michigan
percent
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
US
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
Michigan
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20143.0%
3.1%
3.2%
3.3%
3.4%
3.5%Michigan's Labor Force % of US Labor Force
percent
Source: US Bureau of Labor Statistics; classicalprinciples.com
Outline
1. Michigan’s comeback2. Economic freedom and growth3. Characteristics of best performing states4. Characteristics of worst performing states5. Michigan’s policy mix6. How Michigan can become a top performer
Least Free Third Second Most Free$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
Economic Freedom & Income per Person: 2011
Source: Fraser Institute, Economic Freedom of the World: 2013 Annual Report; World Bank World Development Indicators 2013
Least Free Third Second Most Free$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
$10,000
$11,000
Economic Freedom & the Poor 2011: Lowest 10% Income
Source: Fraser Institute, Economic Freedom of the World: 2013 Annual Report; World Bank World Development Indicators 2013
Economic Policies Promoting Freedom
1. Low tax rates 2. Government efficiently spending on
essential public services 3. Allow markets to operate freely4. Respect the rule of law 5. Promote overall price stability
State Policies Promoting Freedom1. Low tax rates 2. Government efficiently spending on essential public
services 3. Allow markets to operate freely
Right to work legislation Avoid laws fixing wages and prices Minimize regulations
4. Respect the rule of law
Outline
1. Michigan’s comeback2. Economic freedom and growth3. Characteristics of best performing states4. Characteristics of worst performing states5. Michigan’s policy mix6. How Michigan can become a top performer
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 201470
80
90
100
110
120
130
15.0%
15.5%
16.0%
16.5%
17.0%
17.5%
18.0%
18.5%
19.0%
19.5%
10 Top Performing States: 1993 - 2014
State tax burden 100 = US average
Tax Burden
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
State share of US income
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
Share of US incomeTX, UT, WY, CO, AZ, ID, SD, WA, NC, NM
US average
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20141.0
1.5
2.0
2.5
3.0
3.5
Personal Income Growth: Top 10 Low Tax States
Index: 1993=100
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
US average
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 201470
80
90
100
110
120
130
13.00%
13.50%
14.00%
14.50%
15.00%
15.50%
16.00%
16.50%
17.00%
17.50%
18.00%
Six States with no Tax on Individual Income
State tax burden relative to US
Tax Burden
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
US average
State share of US income
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
Share of US incomeFL, NV, SD, TX, WA, WY (AK not included)
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 201470
80
90
100
110
120
130
9.0%
9.5%
10.0%
10.5%
11.0%
11.5%
12.0%
States with No Individual or Corporate Income Tax
State tax burden relative to US
Tax Burden
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
US average
State share of US income
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
Share of US income NV, TX, WA, WY
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 201433%
34%
35%
36%
37%
38%Share of US Income
percent
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
percent
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
percent
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
22 States with Right-to-Work Laws
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 201470
80
90
100
110
120
130
1.40%
1.45%
1.50%
1.55%
1.60%
1.65%
1.70%
1.75%
1.80%
State Relative Tax Burden & Economic Performance
Colorado
US average
Share of US income
Tax Burden
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
State tax burden 100 = US average State share of US income
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20141.0
1.5
2.0
2.5
3.0
3.5
Index 1993=1
Source: BLS; US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.-com
US average
Personal Income Growth: States with Lowest % Union Work-ers
AZ
AR
TXIDSDLAUTSCMS
NC
Outline
1. Michigan’s comeback2. Economic freedom and growth3. Characteristics of best performing states4. Characteristics of worst performing states5. Michigan’s policy mix6. How Michigan can become a top performer
Characteristics of Poorly Performing States
• Policies restricting economic freedom:– High and rising tax rates – Wasteful government spending – Onerous regulations– Forced unionism (no Right to Work law)– Large union penetration– Overburdening debt
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 201470
80
90
100
110
120
130
30.0%
30.5%
31.0%
31.5%
32.0%
32.5%
33.0%
33.5%
34.0%
34.5%
35.0%
10 Worst Performing States: 1993 - 2014
Tax Burden
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
Share of US income
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
Share of US income
41. MO42. NJ43. CT44. AL45. PA46. RI47. IL48. IN49. OH50. MI
State tax burden 100 = US average
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20141.0
1.5
2.0
2.5
Personal Income Growth: Top 10 High Tax States
Index: 1993=100
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
US average
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 201462%
63%
64%
65%
66%
67%Share of US Income
percent
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
28 States without Right-to-Work Laws
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20141
2
3
US average
Index 1993 = 1
NY, AK, HI, WA, RI, CA, MI, NJ, IL, NV
Source: BLS; US Census Bureau; BEA; classicalprinciples.com
Personal Income Growth: States with Highest % Union Workers
Outline
1. Michigan’s comeback2. Economic freedom and growth3. Characteristics of top performing states4. Characteristics of bottom performing states5. Michigan’s policy mix6. How Michigan can become a top performer
How Michigan Compares to Other StatesTax burden
Spending on Education
Spending Infrastructure
Public employees compensation
Union members
Debt
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 201470
80
90
100
110
120
130
Relative Tax Burden: Michigan & OGL States
State tax burden relative to US
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
US average tax burden
Source: US Census Bureau; Annual Surveys of State Government Tax Collections; BEA; classicalprinciples.com
Other Great Lake States
Michigan tax burden
State Spending % Income: Michigan & US (2012)
US Average Michigan $ difference General Exp. 14.4% 16.2% $6.9 billion Education 4.4 6.1 6.4 Welfare 3.6 3.9 1.2 Highways 0.8 0.6 -0.8
Source: US Census; 2012 Annual Survey of State & Local Government Finances
State Spending % Income : Michigan & OGL (2012)
OGL Michigan $ difference General Exp. 12.9% 16.2% $12.4 billion Education 3.9 6.1 8.4 Welfare 3.2 3.9 2.8 Highways 0.8 0.6 -0.8
Source: US Census; 2012 Annual Survey of State & Local Government Finances
Wages & salaries per worker: 2012
US average Govt. Premium
Private Nonfarm: $37,400State & Local employees: $45,500 22% Federal civilian workers: $74,000 98%
Michigan Private Nonfarm: $35,000State & Local employees: $44,000 26% Federal civilian workers: $68,000 94%
Source: Census; US Bureau of Economic Analysis, Regional Data
Compensation per worker: 2012
US average Govt. Premium
Private Nonfarm: $44,800State & Local employees: $66,500 48% Federal civilian workers: $105,000 134%
Michigan Private Nonfarm: $43,000State & Local employees: $64,500 50% Federal civilian workers: $100,000 133%
Source: Census; US Bureau of Economic Analysis, Regional Data
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20138%
10%
12%
14%
16%
18%
20%
22%Union Members % All Workers
percent
US average
Other Great Lake States: WI, IL, IN, OH
Michigan
source: US Bureau of Labor Statistics; classicalprinciples.com
Worse States for Accumulating Debt Burdens on Future Taxpayers
1. Connecticut $48,1002. Illinois 43,4003. New Jersey 36,0004. Massachusetts 28,0005. Hawaii 27,0006. Kentucky 26,000 7. New York 21,700 8. California 21,4009. Michigan 19,300 ($6,000 lower than previous year)10. Delaware 17,200
Source: Institute for Truth in Accounting; Financial State of the States, 2013
Takeaways for Michigan1. Michigan is no longer the worst performing state, it’s closer to the US average.
This is a major improvement.2. We’re a high-tax, high-spending state. Given its income, Michigan’s annual
government spending is $7 billion higher than US average and $12 higher than neighboring states.
3. Michigan’s state & local employees wages & salaries are well-above (26%) the state’s private sector workers.
4. Michigan’s state & local employees have pensions that are twice as large as the state’s private sector workers.
5. Given its income, the state has underfunded highway infrastructure by $800 million a year compared to other states.
6. State debt is high (9th worse) but coming down rapidly
How to make Michigan a top performing state
1. Cut tax burdens to below US average-cut or eliminate all income taxes-pay down debt
2. Limit state spending to essential public services:- reduce public employee compensation- shift public employees to IRA pension plans- end corporate welfare- increase spending on highway infrastructure
3. Remove regulations that inhibit individual freedom- repeal minimum wage to increase real wages