Spending more in one area of the economy comes at what price?

One of Governor Whitmer’s veto targets may have been a good thing.  In one way anyhow.

For all the wrong reasons, the governor popped the fuses on a number of causes that have had state support for years.  Charter schools ability to get on-par funding with their failing counterparts, health subsidies to regional hospitals, and busing for kids in remote regions closely associated with the house speaker’s election district.

All of these met the veto pen as leverage for her 45 cent a gallon gas tax.  Clearly, the governor has shown where her heart lays on particular issues. Using at-risk children and health providers as leverage to get her 45 cent tax on the working poor.

One particular veto however, has a silver lining.  The end of taxpayer dollars used for advertising a particular industry.

Under the guise of benefit to all, the tourism industry has enjoyed a 13 year subsidized existence with the Pure Michigan campaign. 

The state has run the Pure Michigan campaign since 2006, ultimately placing advertisements outside of Michigan in hopes of luring in tourists and their dollars. It has had some memorably creative moments, such as the ads narrated by Michigan actor Tim Allen and overlaid by the theme music from the movie “Cider House Rules.”

We all like the music, and know the voice.

But imagine however, if the state instead promoted the auto industry by taxing us and made videos with Dennis Leary, Mike Rowe, or Sam Elliot selling Detroit made trucks and cars.  In such a case. one would ask why that industry doesn’t pay for it’s own advertising, right?

Somehow the tourism industry has managed to capture the imagination of Republicans and Democrats alike.  An “if we build a tourist brand, they will come” consensus has cost us hundreds of Millions of dollars in the last decade and a half.

Completely ignoring the fact that Michigan has ALWAYS had a healthy tourist element that was only marginalized by high fuel costs (adding 45 cent a gallon wouldn’t help) and economy downturns, lawmakers have fantasized that for every $1 Spent $7 would return to state coffers.  Unfortunately, as a Mackinac Center study reveals, even a dollar would look rosy:

We are comfortable labeling Pure Michigan “ineffective” because we have taken an exhaustive look at it and found a huge negative return on investment. You’d hope that an advertising campaign would at the very least recoup its costs. But we found that for every $1 million in spending to promote tourism, there was an increase of just $20,000 in extra economic activity for the state’s accommodations industry.

That is not $20,000 in additional tax revenue for the state, just extra business activity. We also looked at other sectors likely to benefit from such spending — recreation, entertainment and arts — and none fared any better.

2% ROI, a 98% loss.

If that was not bad enough, accommodation of tourist activity has other costs.  Traffic congestion in some areas like my own (Grand Traverse) can be exacerbated and lead to higher spending beyond gas tax compensation.  In Alger county, they recognize the toll it takes on their infrastructure.

In Alger county, citing 240% increases in non-residential emergency services use, increased traffic violations, EMS availability shortfall due to distances they must travel, park maintenance costs, and additional policing, they have resolved to support legislation as relief.  Because the local population can no longer subsidize the strain on their local services due to increased transient populations they want to add taxes to the industries that ‘benefit.’

If passed, 2019-HB-4590 would allow the local communities to assess for those added costs relating to the increase in tourism supposedly created by Pure Michigan advertising.  So a room that costs $100 would see the minimum current state applied 6% sales (USE) tax and then other local lodging taxes where allowed, and THEN add another (up to 5%) excise tax the local government felt was needed to recoup it’s costs of being a transient center.

HB 4590 is not at all off the mark to solve/remediate a current symptom, but reveals another flaw with government involving itself in economic endeavors.  Sans the state sponsored intervention of pure Michigan, two things might happen; communities might evolve more naturally, and people who wander through our beautiful state might have a more affordable experience.

Pure Michigan as a voluntary effort by hoteliers makes much more sense.  As any movie production might advertise it’s latest and greatest film, those who participate within the Pure Michigan Framework can benefit directly. If they don’t recognize the benefits enough to pay their own way, then maybe it wasn’t such a good deal for all of us anyhow, especially with the added costs of accommodating their patrons.

Unless the state is willing to pursue similar promotional efforts to each and every specific industry, the cost to Michigan taxpayers who are outside the tourism industry should be forever and permanently stopped.

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