Pay Me Now or Pay Me Sooner

by John Peters  

Michigan , like many other states, is going through the withdrawal that comes with not being able to maintain lavish state spending at previous levels since revenues have fallen off.  

There are several reasons why Michigan has less “walking around money” than it did even a few years ago. The loss of manufacturing jobs has hit Michigan particularly hard. The drop off in the stock market caught Michigan with its pants down, as it did for most investors who thought that the roller coaster only went up.  Cutbacks in federal funding also put a crimp in the spending plans of our elected check-writers in Lansing , even though the state should not have to ask for the feds to return our money.  

Michigan ’s governor and legislature responded to this mini-crisis with a variety of solutions. A huge tax increase was imposed on the sale of cigarettes.  This was a “win-win” measure. Smokers are the modern lepers of American society and make an easy target.  If they continue to smoke, the State will continue to benefit from their overtaxed tobacco. If they stop buying, then smoking will decrease.  

In December of 2003, Governor Granholm and the Legislature froze a scheduled income tax rollback.  In the purest tradition of the state, they realized that people had earned the money and were entitled to it, but that did not stop them from stepping in to say “Excuse us, we’ll take that.”  

The boldest move came in September of 2004, when the Michigan legislature passed a bill requiring Michigan property owners to pay their county property taxes six months ahead of their due date. Incredibly, Michigan tried to sell its stunned residents the lie that this was not a tax increase. Oh, really?  Well what if Michigan residents delayed the payment of their state income taxes by six months? I guess that would not be a tax decrease either.  

This measure risks larger problems than the obvious theft which this slight-of-hand move represents.  What if unemployed or elderly property owners living on fixed budgets--something the state would never understand--are unable to come up with several thousand dollars six months earlier?  They risk losing their homes to a tax sale, and who will acquire their real estate in a tax sale? Oh, yes, the state.  The same result will face any property owner who pays his taxes on time, because they will now be considered six months late. As the Church Lady would say: “Isn’t that special?”  

More pronounced than the financial burden which this represents, is the audacity with which the state acts. It actually thinks that its residents are so stupid that they do not recognize this as a tax increase. This is like being held up at gunpoint, while being told that you are actually donating to a charity.  

What if private sector creditors took the same approach?  Imagine the bank telling you that, despite the terms of mortgage note you signed, all payments are now due six months earlier.  What if GM simply elected to accelerate your car payments by six months, and tried to assuage your anger by telling you that they were not increasing the price of your vehicle?  

As clueless as the state may be on other matters, it clearly comprehends the time-value of money. That is why you are charged penalties and interest on late tax payments that would make a loan shark blush.  

In Michigan there is an expression about our volatile weather: “If you don’t like it, just wait a minute.”  Apparently that cliché can now be extended to state law. And like the weather, the change may be for the worse.