No Michigan Tax Deal Is Ever Worth The Paper It Is Written On
Since our devious Governor and his RINO caucus pulled out all the stops to quash the HB 4001 decrements in the state income tax last Thursday, it has dawned on Michigan politicians that the optics of the SB 111 – 115 Dan Gilbertville tax breaks just got real ugly. You can’t hand $ 1.8 billion of state revenue over to politically connected developers after stiffing the public at large without gruesome consequences. This is going to decrement some Senators’ campaign finance committee balances.
No one should fault Speaker Leonard for putting HB 4001 up for a losing vote. Bottling up and fiddling legislation behind closed doors until a winning margin is assured is not an exemplar of government transparency. Brits and Europeans may regard such shifty back room shenanigans as the hallmark of sophisticated political process, but here in America constituents want to know exactly how they are being represented. Thursday’s vote told us more about the RINOs in the Michigan House than years of deceitful political media articles and reports.
Thank you Speaker Leonard for fostering genuine political transparency. Long overdue in Michigan.
It now appears that killing both tax reductions was the plan all along. Bridge Magazine and the Michigan Municipal League just launched a trial balloon to gut the Proposal A constitutional amendment of 1994. Proposal A limited the tax depredations of government employees acting through their local units of government, a popular activity in Michigan’s more leftward big cities and counties. The sales tax was increased 50%, but property owners got some constitutionally protected tax relief in return.
Local government employees and their Democratic political puppets want to renege on the 1994 Proposal A tax deal. Well, not entirely. Just the constitutionally protected property tax relief. No one is offering to restore the 4% sales tax rate. What was it JFK said about negotiating with the Soviets? “We cannot negotiate with people who say what’s mine is mine and what’s yours is negotiable.” Public employees and their subservient Democratic politicians have a lot of gall claiming that President Trump is a Russian stooge and a neo communist tyrant to boot.
The underlying issue here is pension and ‘other post employment benefits’ (OPEB, mostly retiree health care) underfunding, something that the Michigan Municipal League and their mouthpieces at Bridge somehow fail to mention. Government employee pensions whose funding is the responsibility of the Michigan state government are underfunded by $ 31.3 billion. No one has put up an estimate of underfunded local govenment OPEB’s, but their aggregate OPEB number is at least as large as the pension underfunding – if not a lot larger.
This has occurred due to the Federal Reserve zero interest policy, lavish promises made in government employee contracts, creative local government budgeting, and reckless pension fund investment strategies. The Federal Reserve’s zero interest rate policy has not just screwed seniors living off their nest eggs, it also screwed pension plans. None of Michigan’s government pension plans and OPEB funds have hit their historical 8% rate of return lately, but you would not know this by reading their CAFRs. Crunch time has arrived.
Article IX § 24 of the Michigan Constitution prohibits diminishment or impairment of the accrued pension benefits of government employees at all levels, so Michigan’s establishment is going to increase state taxes by that $ 31.3 billion. Plus whatever is necessary to cover the even bigger underfunding of OPEBs. OPEBs are not constitutionally protected by Article IX § 24, but they have been treated as such by emergency managers and in the Detroit bankruptcy deals. The state government is not negotiating these local government employee contract terms, but Article IX § 24 leaves our state government holding the bag when irresponsible local governments go belly up financially.
Local units of government run by irresponsible Democrats and their public employee enablers will force huge state tax increases (or service cuts) on every Michigan resident, regardless of where they live. Residents who will derive no benefit whatsoever from the sweetheart deals being funded with their state taxes. Perversely, these higher taxes will encourage yet more financial irresponsibility on the part of beneficiary government units. They will be back for more in another 23 years, if not sooner. They know a sucker when they see one. Note here that employees of responsible local government units which fully fund their retirement accounts will actually be penalized by this charade along with the rest of us.
Were Bridge and MML honest, they would point out that that Article IX § 24 could be repealed through the very same mechanism which will be required to repeal Proposal A, but they won’t. Nor will our nitwit media, who are held in a complete thrall by the administrative state. Everyone in Michigan’s administrative state expects the governed to accept this latest fait accompli.
Bridge and MML are promoting the government employee gravy train in Michigan – that’s who they represent. Michigan’s local government employees are now much better paid than Michigan’s private sector workers. They have generous pensions and OPEBs that are but a distant memory to Michigan’s private sector workers.
The blatant unfairness of our administrative state’s perquisites got Donald J. Trump elected President. Reneging on the 1994 Proposal A deal will get them more Trump.