Lessons From the Great Lakes

The economic woes up in my former home state of Michigan continue. Unfortunately for those that have not yet escaped, Governor Granholm somehow believes that state government can tax and spend their way out of recession. This WSJ piece provided a couple of valuable lessons for North Carolina.

"…the latest news of Michigan’s deepening budget woe is a national warning of what happens when you raise taxes in a weak economy….Six months later one-third of the expected revenues have vanished as the state’s economy continues to struggle. Income tax collections are falling behind estimates, as are property tax receipts and those from the state’s transaction tax on home sales."

This dynamic effect should be no surprise. The more you tax an activity, the less of that activity there will be – the lowered economic activity thus creates disappointing tax revenues.

I may note here that one of the justifications for tax increases over the past several years both in Detroit and Michigan is population loss. That’s right, for all you folks here in NC that argue or believe that population gains is an excuse for raising taxes – up north they try to justify tax hikes due to a shrinking population. Funny how that works, next thing you know politicians will tell us that no change in population also requires tax increases.

At any rate, Granholm stays true to her liberal ideology by putting her faith in government to turn around the state’s economic woes:

"Ms. Granholm argued that these new taxes would raise some $1.3 billion in new revenue that could be "invested" in social spending and new businesses and lead to a Michigan renaissance."

Hmm, this rhetoric sounds awfully familiar to what the liberal leadership in Raleigh is serving up. Government investing in social spending and business development to grow the economy – how’s that working out for you up in Michigan? Is this really the example we want to follow?

Of course, if you think that population growth is "out of control" in NC, continuing our tax and spend policies could reverse that trend, just as in Michigan:

"Michigan natives grumble that the only reason more people aren’t blazing a path out of the state is they can’t sell their homes."