Fixing Michigan's budget deficit means starting with the tax structure

There's been a lot of talk lately about cutting services to compensate for the state budget deficit facing Michigan in the near future. Cutting services would not only worsen the economic problem, but increase the plight of many already struggling.

The problem is that there is a stigma on the word "tax"; the word "tax" has been weaponized by politicians to push their self-serving agendas. In truth, there are multiple ways that we can increase tax revenues without really affecting our state's prosperity.

• Increase the amount of services that are taxed - Michigan taxes only 26 of the 168 types of services in the state. The argument that it would make investing in Michigan less appealing doesn't really make sense: Michigan currently ranks 40th out of the 50 states in how many services they tax. It's not like we would doing something that no other states employ.
• Reduce Prison Spending - Michigan is one of only four states that spends more on prisons than higher education. Eliminating jail time for some of the lower level crimes would help ease the burden for the prison system.
• Higher Scrutiny on Tax Expenditures - Tax expenditures reduce or eliminate taxes that would otherwise have been paid by individuals and entities, thereby reducing tax revenues. Studies have shown that these expenditures do not stimulate economic development or create jobs. We need to review these expenditures to determine which are worthwhile and which are not.
• Adopt a Estate or Inheritance Tax - 22 states levy an estate or inheritance tax, and Michigan could stand to collect $250 million a year by adopting one. Illinois, Ohio, Indiana, and Minnesota currently have one, making Michigan not the odd one out in the Great Lakes.
• Increase the Beer Tax - An increase of 4 cents, from 2 cents to 6 cents, would generate approximately $100 million in additional revenue for state services.
• Limit Senior Tax Preferences - Michigan tax breaks for seniors are the highest in the country, and three times the national average. Michigan could free up $200 million a year and STILL offer generous breaks.
• Change from a flat income tax to a graduated scale - In the United States, only seven states have a flat tax. A graduated tax could help up to 90 percent of filers because the burden would be reduced in middle and low income earners. Here's how a graduated income tax could work:
  
  3.9 % rate, $0-20k (single) , $0-40k (married)
  4.35%, $20-60k (single), $40-120k (married)
  6.9%, $60k + (single), 120k + (married)
  This tax structure alone could raise up to $600 million in revenue.

Facing a $1.8 billion state deficit in 2011, we need to find ways to balance our budget. No business, organization, or government has ever benefited from cutting services. In fact, success usually means doing the opposite. The problem with Michigan is we have a structural deficit, a deficit that exists regardless if the times are bad or good.

There are easy ways to balance the budget through taxes increases and reducing exemptions that won't break the backs of anyone. It is important that we do not feel the pressures to cut services, and maintain our support system while the economy is at its worst.

We need to set up a budget that works for both next years budget and decades to come. Fixing Michigan's tax structure is the first step in stabilizing our government.