Gubernatorial candidates square off in part one of interview series
PUBLISHED: October 26, 2006
Michigan Gov. Jennifer Granholm, a Democrat, and her challenger, Republican Dick DeVos, recently participated in a question-and-answer session with Heritage Newspapers' Terry Jacoby. Both candidates were given the same questions to answer. Part I of the series focuses on jobs and business in Michigan.
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What will be done to protect state revenue sharing and how will you change the way we try to attract businesses in Michigan?
Granholm: In Michigan, we're changing the way we do business with businesses. I am working every day to provide a better business climate to draw jobs to Michigan. Since 2002, I have signed 71 targeted business tax cuts into law, including a $600-million tax cut in 2005 for our beleaguered manufacturers.
Right now, only 12 states have a lower tax burden than Michigan. We have reduced permitting times for some business permits by over 60 percent by using the power of technology. I personally am going anywhere and doing anything to bring new business to Michigan. I traveled to Japan twice and have brought back more than 20 companies, creating more than 1,000 jobs.
I have also used the automotive expertise of Michigan to attract the automotive industry to create new research and development jobs in Michigan. Toyota is investing $150 million in a new research-and-development facility in Washtenaw County. Hyundai is building a new technical center in Superior Charter Township. Nissan has opened a new design studio in Farmington Hills. Mitsubishi and DaimlerChrysler are partnering to build a $380 million engine plant in Dundee.
While many people have talked about diversifying our economy, I've taken action. My 21st Century Jobs Fund is investing $2 billion in emerging business sectors that promise tremendous job growth: alternative energy, the life sciences, homeland security and advanced manufacturing.
Just last month, we awarded 61 businesses and universities $100 million to create new jobs and expand their business or research in these attractive, high-growth industries of tomorrow. Hundreds of more proposals are pending, which indicates the business community is ready and eager to create new jobs in Michigan.
In addition, I am working to give Michigan the most talented work force in the country to draw the jobs of the 21st century. I fought for and signed into law tough new academic standards for our high schools, and I am pushing to give every child in Michigan access to a $4,000 scholarship for college or technical training. Our efforts are already beginning to pay dividends. Google, a company that could have invested anywhere in the world, chose to create 1,000 jobs in Michigan because of the quality of our work force.
The Google announcement is so important because it created a buzz in the technology community. Already, we are receiving more inquiries from other high-tech executives who are saying to themselves, "Hey, if Google is investing in Michigan, maybe we should be, too!"
I am fighting to make Michigan an alternative energy powerhouse by signing tax credits for alternative energy production facilities. United Solar Ovonic is building a massive solar power manufacturing facility in Greenville. Nine ethanol or biodiesel plants will soon be operating in Michigan, with the help of state tax incentives. At the same time, we're building the demand for alternative fuels in Michigan by cutting taxes on ethanol and giving gas stations financial incentives to install ethanol gas pumps. The entire state had only five ethanol pumps at the beginning of this year; my goal is to have 1,000 biofuel pumps by 2008.
Local government budgets are hurting, and we need to ensure that they have the state revenue they need to fund police, fire and other vital services. While revenue sharing has been held harmless for the past two years, we need to increase funds to our local governments.
This year, my Task Force on Local Government Services and Fiscal Stability, consisting of representatives from cities, counties, and townships from around the state, evaluated existing policies that are problematic for local units of government and recommended new policies that will enable to them to continue to deliver essential services. We need this input from our municipal leaders, especially because of next year's sunset of the revenue sharing act.
We face a new challenge now that the Legislature has repealed the Single Business Tax without a plan to protect the $1.9 billion it provided to fund vital services like police and fire protection. This repeal may jeopardize vital revenue sharing dollars and shift the tax burden to our communities instead. As governor, I will fight to make sure that this funding is protected.
DeVos: Revenue sharing is a very important source of funding for local governments and critical to their ability to adequately fund essential services.
Unfortunately, revenue sharing for Michigan communities has been cut or frozen for each of the past three years under Gov. Granholm. As governor, I will support an extension of revenue sharing with the understanding that we must first take steps to rejuvenate Michigan's struggling economy in order to provide increased funding. Money is tight right now in Michigan; when critical services fight over a smaller and smaller piece of the state budget pie, no one wins.
We must focus our efforts on climbing out of our single-state recession, bringing jobs back to Michigan, and turning the economy around. A DeVos administration will revive our economy and work together to provide local governments with the revenue they require.
Central to increased funding is improvement of Michigan's business climate. New economic growth will increase state and local revenues at the same time. In order to achieve this growth, we must do away with the tax structures and red tape that strangle Michigan businesses. The repeal of the SBT is a start, but Michigan's tax climate is still not competitive with states that are seeing economic growth. As governor, I will work to reduce taxes and make state government work with Michigan businesses to promote the job growth our state so desperately needs.
How would you replace the revenue lost with the repeal of the Single Business Tax?
Granholm: The Republican Legislature took the irresponsible way out and has simply eliminated the Single Business Tax without first coming up with a plan. By doing so, they created a $1.9 billion hole in the state budget, which represents 20 percent of our general fund revenues. It is telling that a Wall Street credit agency downgraded Michigan's credit rating immediately after the Republicans voted to eliminate the SBT without a plan to protect the vital revenue it provides.
While I agree that the Single Business Tax must be repealed, I will not stand by and watch the tax shifted on to the backs of Michigan taxpayers. I want a guarantee from Republicans that no plan to replace the revenue from the business tax will increase taxes for citizens or slash funding for health care, education, or public safety.
I have proposed a plan to eliminate the Single Business Tax as we know it by lowering the tax rate, simplifying the tax and making it less payroll sensitive. My plan calls for a reduction in the corporate tax rate from 1.9 percent to 1.2 percent. It creates a manufacturing and research-and-development personal property tax credit to help our manufacturers and draw new high-tech companies to Michigan. It eliminates loopholes that allow some business to avoid the tax. I am the only candidate for governor who has put a plan to replace the SBT on the table.
DeVos: First, getting rid of the SBT will help to create jobs, which will actually help the budget. Second, I will replace the majority of the revenue with a broad-based business tax. Like other states, it will be centered on business profits and gross receipts. Simple and fair — it won't punish job creation. If you make more, you will pay more. I will not place the burden of additional taxes on Michigan families.
Also, I have already identified $800 million in waste and fraud that the state can cut out of its budget without harming education, health care, etc. That includes requiring a four-year time limit on welfare that would save $80 million the first year alone. The governor has opposed this measure and Michigan is one of only two states in the nation without a limit.
How big a deterrent is Michigan's business tax to investment and job creation?
Granholm: Michigan's business tax burden is currently the 13th lowest in the country, according to the Council on State Taxation. I am constantly trying to make our business tax structure even more competitive. I've signed 71 targeted business tax cuts since taking office, including a massive $600 million cut to encourage our manufacturers to in-source jobs to Michigan. Republicans who try to claim that the state's business taxes are the reason why our economy is struggling are playing loose with the truth.
In August, the non-partisan Upjohn Institute for Employment Research issued a detailed study, which showed that Michigan's business taxes had very little impact on job creation.
Michigan's economy is hurting because we have a much higher concentration of automotive jobs than any other state, and when that industry is struggling with unfair foreign competition, the entire state struggles.
Bill Gates says that high-tech companies like his don't choose locations because of taxes — they choose places that have the most talented work force. That's why Google's decision to set up camp in Michigan is such good news. It shows the world that we have the talented work force to compete with anyone in the world.
I will continue to invest in education to make sure Michigan draws the jobs of the 21st century.
DeVos: Michigan's business taxes create a significant deterrent to job creation. The governor claims taxes don't matter. But if you look back over the past year, every major job creation announcement was made in part because tax incentives were offered to job providers. In fact, nationwide CEOs ranked Michigan 49th in a survey of the best states to do business.
The truth is that Michigan is uncompetitive in part because it is a high tax state; so high, that we must offer tax rebates for businesses to locate here and create new jobs. In order to become more competitive, we must create a jobs friendly business climate.
I believe rather than offering huge tax rebates to one company to create 1,000 new jobs, we must create a competitive environment in which 1,000 businesses can each add one job. Instead of Band-Aid approaches to job creation, we need a fundamental change that makes Michigan competitive once again. A healthy economy is one in which all job providers have the ability to grow their business without tax incentives from state government.
If Michigan's business taxes are the 13th lowest in the nation, why do we constantly hear that high taxes in Michigan are a problem in attracting new businesses?
Granholm: It's politics. No one likes paying taxes — no matter how competitive they are with the rest of the country. The Republicans are trying to make business taxes an issue for voters, but I don't think it is going to work. Michiganians understand that our state won't be an attractive place for businesses to invest if we slash our investments in education, infrastructure, health care and public safety.
The underlying economic problem that we are facing is that at times our workers are competing against low-wage workers in Mexico and China. This has nothing to do with our tax climate and everything to do with unfair trade barriers that are hurting our workers and the Bush administration's refusal to stand up for Michigan businesses.
DeVos: Make no mistake, Michigan business taxes are not 13th lowest in the nation. According to a study done by the New York Public Policy Institute, Michigan actually has the fifth highest business tax burden in the country.
A nationwide CEO survey ranked Michigan 49th in a survey of best states in which to do business. The facts are clear to me: Study after study confirms that taxes matter, and that Michigan taxes are too high. Michigan manufacturers have to suffer under the third highest personal property taxes in the nation. Combine this with the fact that other Midwest states have gotten rid of the PPT and are promoting reformed business tax structures, and Michigan is clearly missing the boat.
What we've been doing for the last four years hasn't been working. We are clearly not competitive with other states, and we're suffering job losses because of it.
Unfortunately, the current governor promised to give help for Michigan small business. But instead, she proposed $2 billion in tax increases. Today, only 4 percent of Michigan small businesses describe the state's climate as "supportive." If they can go across the border to other states with lower taxes and fewer regulations, why wouldn't they? Michigan is in desperate need of a change.
Does Michigan give away too much or too little when it comes to incentives to lure business?
Granholm: I will go anywhere and do anything to bring jobs to Michigan. Targeted tax incentives are a valuable economic development tool. We have offered tax incentives to help our manufacturers stay in Michigan and draw new businesses here. My administration will work with specific companies to develop specific tax incentives on a case-by-case basis to make sure we remain competitive with other states who are doing the same thing.
But there is much more to economic development than tax incentives. Businesses are investing in Michigan because of our low business taxes, our excellent universities and our highly trained, experienced work force.
DeVos: The fundamental problem with the state giving away tax incentives is that it requires state government to pick winners and losers. Historically, government has not been good at predicting which businesses will succeed and which will fail — or which will create jobs and which will not.
And what are we telling small businesses that do not receive these tax breaks? That we don't care about the jobs they provide? I believe we must work to create a business climate that treats all businesses fairly and brings more jobs to Michigan.
These tax abatements have been the foundation of the current governor's economic plan, but they will not be the foundation of mine. I will work to make Michigan's overall tax structure competitive again. However, I understand that Michigan cannot unilaterally disarm. I will use abatements where necessary to assure that Michigan offers a competitive location option for businesses that will contribute jobs and long-term growth to our economy.
We hear all the time about attracting new business, but what can be done to protect
existing businesses?
Granholm: Most importantly, Michigan needs a tiger in Washington enforcing trade agreements.
Unfortunately, right now we have a pussycat. China is manipulating its currency and stealing our patents, and South Korea is setting up barriers that keep Michigan products out of their country. These are all in violation of trade agreements, but the Bush administration just sits back and watches. Our manufacturers need new leadership in Washington.
I am fighting to give all businesses the tools they need to thrive in Michigan. We are constantly making our business climate friendlier by keeping taxes low and streamlining the state bureaucracy. When necessary, I am offering our employers targeted tax incentives to make it easier for them to keep jobs in Michigan.
My Buy Michigan First program is insourcing jobs to Michigan by requiring state government contracts to go to Michigan businesses whenever possible. Now, more than 85 percent of state contracts go to Michigan businesses, pumping billions of dollars back into our economy.
Our businesses need a national solution to rising health care costs, but I have signed tax cuts to make it easier and cheaper for businesses to provide health care benefits for their employees. My Michigan First health care plan will make it even more affordable for businesses to offer benefits to their employees.
At the same time, we are making sure Michigan workers have the skills that our businesses need. My MI Opportunity Partnership is working with businesses to provide funding to give workers the training they need to fill job vacancies that are open today. In its first year of operation, the partnership has already connected more than 107,000 with new jobs.
DeVos: I truly believe that the best customer is the customer you have. We must fight to keep our Michigan businesses from leaving and choosing other states.
Unfortunately, what we're doing now isn't keeping them here; too many are leaving and taking jobs with them. As governor, I will provide results to improve our business environment and to give our job providers a reason to choose Michigan. My administration will work to overhaul our tax structure, reduce the cost of health care, bring our expensive energy costs under control and dramatically improve a burdensome, sluggish bureaucracy.
While it is important to attract new businesses to Michigan that are looking to create thousands of jobs, I believe it is equally important to have an environment where 1,000 Michigan businesses can each add one job. Michigan businesses must have a reason to grow in Michigan. As governor, I will give them that reason. My administration will fight to give Michigan a competitive advantage that keeps companies and jobs from leaving our great state.
For more information, check out Mission No. 1 in my Michigan TurnAround Plan, where I outline my ideas on how to give Michigan small businesses a chance to succeed.
Government certainly plays a role in creating new jobs and attracting new businesses, so what can be done at the county, city or township levels to help accomplish this?
Granholm: Efforts at the local level are crucial in attracting new businesses and creating jobs for our citizens. I have worked with local officials to make sure that we are doing everything we can to foster a climate that encourages investments from businesses, and to make sure that those investments serve our people well.
We make sure to include Downtown Development Authorities, local Economic Development Corporations and any other applicable economic investment authorities in creating economic development plans and incentive proposals.
At the same time that we consult with localities on specific proposals, I have put in place and expanded programs that empower and assist local governments in encouraging economic development.
Our brownfield tax incentives offer Single Business Tax abatements to help private industries redevelop sites. These sites are identified and vetted by local brownfield redevelopment boards, which include municipality leaders.
Brownfield incentives are helping bring real investments into cities and towns across the state. My Cool Cities initiative is another way that I have worked to include local governments in the economic development process. The idea behind Cool Cities is that we can take basic steps to make our cities attractive, fun places to spend time, particularly for younger generations. The projects themselves often create jobs in the short term, and they help create a climate that entices employers and employees alike to our great cities.
DeVos: Providing for the future success of Michigan's local governments is an issue of great importance. Creating a more equitable distribution of revenue sharing will play a significant role in this mission. In order to provide more shared revenues, we must take the necessary steps to turn Michigan's economy around.
Whether you live in a township, a city, or a village, a healthy economy translates into healthy communities that can provide jobs, good roads, strong schools and other critical services for their residents. As governor, I will make this turn-around my first priority.
What can be done outside of government to attract business?
Granholm: We've seen that economic development can snowball when you have a critical mass of similarly growing companies in a particular area. Look at Silicon Valley. That's why I'm so excited about Google choosing Michigan, which is making other high-tech companies think about setting up camp here as well. It's why I'm working to leverage our automotive expertise to make Michigan the worldwide hub for manufacturing research and development. It's why we're investing in life sciences research, which has huge potential for Michigan because of our top-notch universities. And it's why I've been putting such a focus on alternative energy development through my 21st Century Jobs Fund and other government incentives.
Michigan put the world on wheels, we lead the world in various agriculture research and we can be the state that ends America's independence on foreign oil.
At the same time, we need a vibrant venture capital community in Michigan to invest in growing businesses. That's why our Venture Michigan fund is so innovative. It has raised $200 million from outside investors to put into venture capital firms that will invest in Michigan businesses. These private companies will do the investing, but state government is helping provide some of the capital.
DeVos: I believe that sometimes the best thing government can do is to get out of the way. State government must not over- regulate and overburden the many strengths Michigan already has. Our state's unique characteristics will by themselves attract job providers who want to locate here.
Our skilled work force, world-class research universities, tremendous health care infrastructure and spectacular natural resources are all strengths Michigan can build on. These are the unique characteristics of a great state that is just waiting to fulfill its potential.
As governor, I will give businesses an opportunity to thrive and grow. I will streamline and simplify state government in order to make Michigan friendly to job providers.
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