I will have the opportunity next week to meet, in a round-table discussion, with the Governor of Michigan. An organization my wife belongs to gets an audience every year as the Governor is an honory member of the group.
We've discussed the national sales tax on this site and I see little hope of it passing anytime soon. I fall somewhat on the Conservative side on this subject and the Governor is quite Liberal.
I may or may not get an opportunity to speak as many of the group's members do not agree with the Governor and we only have two hours of her precious time.
I've written a position piece to present to her in case I don't get to speak. I don't agree with a lot of some people's politics on this site but I do respect your intelligence. I'm hoping I can present this in a non-political fashion. Have I succeeded?
Governor Granholm,
The State of Michigan could eliminate the state income tax in favor of a state sales tax of something less than 10%.
Michigan has developed a cash culture that, as former Attorney General, you saw all the time in Michigan’s court system. As a tradesman I can tell you that many do not pay their fair share at the state or federal income tax level. They do, however, pay state sales tax for all of their material. We pay sales tax at the point of material pick-up.
Other less desirable professions thrive in a cash environment. Criminals rarely pay any income tax but they sure pay large sums of sales tax. Why not make all criminals help pay for their punishment?
I estimate that 40% of all residential construction income goes unreported. I know of a contractor who has the perfect crime in action. Commercial work all runs through the books while residential work gets paid in cash. The material and labor for the cash jobs go against company profits, effectively eliminating any state or federal tax liability. Nice work if you can get it.
Undertakers, babysitters, and even attorneys operate in this cash world, too. Some lady wants you to bury her husband and hands you $10,000 in cash. How much, if any of that, is the average person going to report? With the elimination of the income tax you would simply shift 3.9% to the sales tax column. You could even lop off a full 1% and collect 25-50% more income for the state.
You may question my estimates but the specific number doesn’t matter. You know that there are hundreds of thousands of people who are not paying their fair share for the schools they send their children to, the roads they drive on and the security we enjoy from having a powerful state police department. They don’t contribute to mental health or any other social program but often benefit from those programs.
There are junk dealers who are stripping the city of Detroit’s abandoned homes for copper and aluminum. Recycled brick prices cause gangs to rip down walls and cart away the booty for a cash payment. If a big junk dealer is cashing in $10,000 a month and spending it all the state gets $600. If he’s paying 9% sales tax it wouldn’t matter where he or the contractor got his money. It would only matter where they spent it.
Once you got to keep 3.9% more, you would then have the choice of whether to spend it or save it. This state needs more savers. Savings is very good for the economy, as you know. An objection will be raised that the poor will pay a disproportional share of their income in sales tax. In my opinion it could be construed as disproportional on the other end of the scale. The wealthy will consider this a luxury tax but will come to understand the offset benefits. The poor will be able to adjust through some type of assistance already effectively in place. The middle class would actually benefit the most, as the opportunity to save is one that is often missed.
I believe that sufficient funds would be raised through this tax shift to eliminate the Small Business Tax that we all suffer. The SBT is a clear impediment to new businesses locating here and to any individual starting a small business. Imagine eliminating the SBT and the Michigan State income tax. I believe that would make Michigan a much more attractive place to live and do business.
I’ve long been a proponent of a national sales tax but that will never come to pass as there are 50 states and 50 opinions. There is nothing to stop Michigan from leading the way in eliminating and lowering taxes.
Barry Wolk
Farmington Hills, MI
We've discussed the national sales tax on this site and I see little hope of it passing anytime soon. I fall somewhat on the Conservative side on this subject and the Governor is quite Liberal.
I may or may not get an opportunity to speak as many of the group's members do not agree with the Governor and we only have two hours of her precious time.
I've written a position piece to present to her in case I don't get to speak. I don't agree with a lot of some people's politics on this site but I do respect your intelligence. I'm hoping I can present this in a non-political fashion. Have I succeeded?
Governor Granholm,
The State of Michigan could eliminate the state income tax in favor of a state sales tax of something less than 10%.
Michigan has developed a cash culture that, as former Attorney General, you saw all the time in Michigan’s court system. As a tradesman I can tell you that many do not pay their fair share at the state or federal income tax level. They do, however, pay state sales tax for all of their material. We pay sales tax at the point of material pick-up.
Other less desirable professions thrive in a cash environment. Criminals rarely pay any income tax but they sure pay large sums of sales tax. Why not make all criminals help pay for their punishment?
I estimate that 40% of all residential construction income goes unreported. I know of a contractor who has the perfect crime in action. Commercial work all runs through the books while residential work gets paid in cash. The material and labor for the cash jobs go against company profits, effectively eliminating any state or federal tax liability. Nice work if you can get it.
Undertakers, babysitters, and even attorneys operate in this cash world, too. Some lady wants you to bury her husband and hands you $10,000 in cash. How much, if any of that, is the average person going to report? With the elimination of the income tax you would simply shift 3.9% to the sales tax column. You could even lop off a full 1% and collect 25-50% more income for the state.
You may question my estimates but the specific number doesn’t matter. You know that there are hundreds of thousands of people who are not paying their fair share for the schools they send their children to, the roads they drive on and the security we enjoy from having a powerful state police department. They don’t contribute to mental health or any other social program but often benefit from those programs.
There are junk dealers who are stripping the city of Detroit’s abandoned homes for copper and aluminum. Recycled brick prices cause gangs to rip down walls and cart away the booty for a cash payment. If a big junk dealer is cashing in $10,000 a month and spending it all the state gets $600. If he’s paying 9% sales tax it wouldn’t matter where he or the contractor got his money. It would only matter where they spent it.
Once you got to keep 3.9% more, you would then have the choice of whether to spend it or save it. This state needs more savers. Savings is very good for the economy, as you know. An objection will be raised that the poor will pay a disproportional share of their income in sales tax. In my opinion it could be construed as disproportional on the other end of the scale. The wealthy will consider this a luxury tax but will come to understand the offset benefits. The poor will be able to adjust through some type of assistance already effectively in place. The middle class would actually benefit the most, as the opportunity to save is one that is often missed.
I believe that sufficient funds would be raised through this tax shift to eliminate the Small Business Tax that we all suffer. The SBT is a clear impediment to new businesses locating here and to any individual starting a small business. Imagine eliminating the SBT and the Michigan State income tax. I believe that would make Michigan a much more attractive place to live and do business.
I’ve long been a proponent of a national sales tax but that will never come to pass as there are 50 states and 50 opinions. There is nothing to stop Michigan from leading the way in eliminating and lowering taxes.
Barry Wolk
Farmington Hills, MI
