A Rising Tide Lifts All Boats

Posted: Sep 12, 2006 12:16 AM

The recent Labor Day weekend marked the 36th straight month that the US economy has added jobs. Unemployment in the United States is below the average of recent years. In almost every state in the country, the economy is humming along at near full employment and employers report they are having a hard time filling all the positions they have.

My home state, Michigan, is not one of them.

While the rest of the nation enjoys a 4.7 percent unemployment rate, Michigan's unemployment rate is at 7 percent. Since August of 2003, 5.7 million new jobs have been created in the rest of the country, but in Michigan we're continuing to struggle. And our future isn't looking any rosier.

Although the reasons for Michigan's malaise are varied, one big reason is our state's almost uniquely uncompetitive tax structure, which one General Motors official called the costliest of all jurisdictions where GM operates.

As Ronald Reagan understood, the difference between a good tax structure and a poor one has a very real impact not only on how much money we have in our pockets every April 15th, but whether we have a job to support our families in the first place. According to the Tax Foundation, if Michigan were to eliminate its Single Business Tax, our unique and arcane method for taxing businesses, we would have the best business climate in the region.

A recent study conducted at the US Department of the Treasury reinforces the connection between lower taxes and stronger economic growth. The study found that making the 2001 and 2003 tax cuts permanent would increase the country’s economic output significantly. But Congress will need to act if this is to happen.

When the Republican Congress cut taxes in 2001 and 2003, spurring the 36 month growth in jobs, it unfortunately had to put a time limit on the tax cut to satisfy arcane congressional budget rules that only a true Washington insider could love. Therefore, Congress made the cuts "expire" after 2010, which means that unless Congress acts to make these tax cuts permanent, we'll be left on January 1, 2011 with a massive tax increase.

These tax cuts have lowered federal taxes for over 3.5 million Michigan residents and nearly 750,000 small businesses and if they were to expire, it would not only cripple our business climate, but also Michigan's families. In fact, Treasury officials calculate that if the tax cuts are allowed to increase in 2011, a family of four living on $50,000 a year would see its taxes jump from $1,600 to $3,700 per year – an increase of around 130 percent.

Anywhere outside of Washington, making the job creating, tax cuts permanent seems like a no-brainer. Liberals, however, are furiously resisting making these lower tax rates permanent because lower taxes means less money for Washington to spend on projects such as the now infamous "bridge to nowhere" in Alaska that is costing us hundreds of millions for a project that will only benefit a few dozen people.

There are countless other examples of such waste, the only purpose of which is publicity for the politicians that created the "earmark" in the spending bill authorizing the project. Just because you have checks in the checkbook doesn't mean that you have money in the bank, and Washington has failed to understand that.

You would think that all of Michigan's representatives in Congress would be very sensitive to how high taxes can kill jobs given Michigan's own recent experience. But even after seeing how the tax cuts she voted against led to a strengthened economy, Michigan’s junior Senator Debbie Stabenow continues to support raising your taxes by blocking attempts to make these tax cuts permanent.

In this, Stabenow is only following the commands of the Democrat leadership in Congress and appeasing her own appetite for reckless spending. And she does it well. In fact, she not only voted to fund the bridge to nowhere twice, but she’s earned the title of the "biggest spender in Congress," and she has voted to raise taxes by $1.2 trillion.

That tax relief can spur the economy and thereby benefit all Americans is something that Washington Democrats used to understand. President Kennedy, for example, aggressively cut taxes after being elected to stimulate the economy as a means of helping all Americans. In doing so, he famously observed "a rising tide lifts all boats."

One of the biggest issues in this fall's elections will be whether the conditions that have caused the US economy to grow in recent years will continue, or whether we'll choose policies that will lead the rest of the US to the sort of stagnation we have in Michigan.

Debbie Stabenow's fascination with taxation is the wrong policy for Michigan, and it’s the wrong policy for America.

When I replace Debbie Stabenow in the US Senate, I’ll work with members from both parties who understand that the policies of "tax-and-spend" are an obstacle to jobs and prosperity in Michigan and the rest of America.

Mike Bouchard, Republican Candidate for U.S. Senate (www.mikeformichigan.com)