Talk show host Rachel Maddow recently made Michigan Gov. Rick Snyder the focus of an on-air attack on his policies during a seven-minute tirade on her MSNBC show.
Maddow suggested that Snyder was fabricating a budget crisis to get his agenda through.
Mackinac Center for Public Policy fiscal policy experts Michael LaFaive and James Hohman commented on a half dozen of the statements made by Maddow:
Maddow: “Rick Snyder has proposed an actual tax increase … on seniors and on poor people.”
Reality check:
“He is taking away exemptions on pensions and the earned income tax credit,” Hohman said. “This is not ‘raising taxes’ so much as removing special tax treatment. In fact, his plan lowers the actual tax rate on everyone from 4.35 percent to 4.25 percent, obviously including seniors and poor people. ‘Raising taxes on seniors and poor people’ implies that he’s carving out special niches for higher taxation, when the proposal removes special treatment.”
Maddow : “He (Snyder) is giving it away in the form of $1.8 billion in corporate tax cuts.”
Reality check:
“The Governor proposes to eliminate the entire state’s tax credit and exemption regime (many of which are subsidies and thus, corporate welfare) and replace them with a smaller and direct tax,” Hohman said. “Michigan’s business tax system is complex and hated, and the governor’s proposal simplifies it and lowers it to encourage growth.”
Maddow: “The governor tells you that you are in a financial emergency.”
Reality check:
The bill lays out objective criteria for judging the finances of a municipality.
“There are 18 explicit events that would trigger a financial review,” says Hohman. “These can be avoided by elected officials well before an emergency is declared.”
Maddow: “Michigan Republicans are telling them they are about to lose their right to elect local government. The Governor is just going to take care of that from now on. You see, the Governor knows best. This whole democracy thing? Turns out it is very inefficient.”
Reality check:
The Local Government Fiscal Accountability Act has been in place since 1990 and was signed by a Democrat governor – Jim Blanchard. Six cities, one village and one school district have operated under an EFM and declarations of financial emergency were made by both Republican Gov. John Engler and Democratic Gov. Jennifer Granholm.
“This law actually encourages local governments to fix their own problems so that the state doesn’t have to do it,” Hohman said. “If local leaders continually choose to ignore or hide their financial responsibility, then the state has a process to help the local government avoid bankruptcy. If the local unit continually refuses to follow the plans laid out, then the state government can appoint a short-term Emergency Manager. “
LaFaive said the existing law permits the elected officials to thwart the needed reforms.
“It was the elected governments that failed to respond effectively in the first place and may have actually caused the problems that brought the unit into fiscal disrepair in the first place,” LaFaive wrote. “The state law also gives that unit fair warning about the consequences of not solving its own fiscal problems.”
Maddow: “Big government conservatism gets really, really, really astonishingly BIG.”
Reality check:
“Maddow is apparently trying to suggest that state involvement in solving a municipal financial crisis is making government more powerful and that this translates into bigger government," said LaFaive. "This bill is designed to offer temporary oversight of a city, and in all likelihood will result in local units becoming smaller and more effective thanks to the ability to set aside union contracts and save money. Lou Schimmel used his (EFM) powers in Ecorse and Hamtramck to sell city assets and contract out services with private, for-profit firms that removed government employees from the payroll and saved millions.”
Maddow: “Cut aid to cities and towns so much that a lot of them are expected to be in dire fiscal straits.”
Reality check:
“Falling property values and increased employment costs will give fiscal stresses to local governments regardless of state aid,” Hohman wrote. “Local government revenue grew at a time when the state’s did not. This was because local government relies on property taxes to a much greater degree. According to the bill analysis and the executive budget, Snyder's plan cuts local government revenue-sharing by $107 million, only a 9 percent cut from last year. Schools are cut 4 percent. According to the Census Bureau, total Michigan tax revenue fell 4.3 percent from 2000 to 2008, adjusted for inflation. Total property tax revenue, on the other hand, increased 18.9 percent.”
LaFaive said some cities were on the verge of collapse before Snyder took office. Detroit, for example, had to borrow large sums of money to pay its general operating costs.
~~~~~
To see the House bill, click here. To see the Senate bill, click here.
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.