michigan’s comeback: where do we stand, where are we heading? robert genetski website:...

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

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


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



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



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


percent


2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20144

5

6

7

8

9

10

11

12

13

14

15Unemployment Rates

percent


US


Michigan

percent


US


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


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


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


State share of US income


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


US average


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


US average



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


Tax Burden


US average



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



percent



percent



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


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


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


Share of US income


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


US average


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







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



US average tax burden


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

michigan’s comeback: where do we stand, where are we heading? robert genetski website:...

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