With state budget shortfalls having recently become so prevalent, it has been interesting to watch how different states have chosen to address their budgetary woes. Fortunately, a collection of influential groups in Michigan, including the Michigan League for Human Services, is seeking to fill their state's budget gap with a combination of policy changes much better thought-out than the regressive band-aid fixes proposed in New Hampshire (cigarette tax hikes) or California (lottery revenues). The plan, proposed by the Michigan League for Human Services and backed by a slew of influential groups, proposes to raise roughly $400 million through a series of relatively small changes, each of which already gained approval at some point from either the Governor or the legislature in the 2005 or 2007 legislative session.
Among the proposed list of reforms is the elimination of numerous unjustified sales tax exemptions. Vending machine snacks, international phone calls, and purchases made at prison stores are among the items that would be subject to the sales tax under the proposal. Another major component of the proposal would decouple state business depreciation rules from the federal rules, as was advocated in an earlier Digest piece.
While certainly not a comprehensive list of what could be done, the proposal is notable for its eclectic approach that simultaneously aims to improve efficiency and boost state revenues. States considering unimaginative hikes in consumption tax rates or damaging cuts in public services would do well to instead follow the lead of this proposal and seriously examine what kind of needed tweaks to their tax systems could boost revenues.