Michigan has the 10th highest population in America, but it’s economy functions worse than Rhode Island’s. Despite Governor Whitmer’s bizarre attempts at burying her head in the sand—like claiming that the state has the number 1 economy— she can’t hide the facts.
Michigan ranks 40th in job growth, 39th in median income, and 41st in unemployment. Some have tried to write off the unemployment number, which is around 4.5%, as neatly between the 3-5% ideal. However, that level of unemployment unmitigated by a thriving economy represents a worrying trend.
More importantly, Michigan’s population is in decline, and projected to actually shrink in the coming years.
With the numbers in mind, it’s no wonder that people are leaving Michigan: they don’t have job opportunities. Sure enough, around half of the 169,000 people who fled the state in 2022 did so because they found a job elsewhere. Which states did they go to? Sure, the usuals— Florida, Texas, and Arizona— got their fair share of Michiganders, but a nearly equal number moved to Indiana, Ohio, and Illinois.
If people are fleeing your state for Illinois, there’s a problem.
The first factor one would immediately point to are taxes. Americans have been moving away from high-tax states and into low-tax states for years, and not just the usual suspects. Seemingly unassuming states like Tennessee, Georgia, and North Carolina who boast some of the lowest taxes in the country, took the next most substantial percentage of Michiganders.
Though Michigan is competitive with Indiana and Ohio in some ways, both of those states have lower taxes where it matters. At 3.5% and 3.05% respectively, Ohio and Indiana’s income tax rates are around a percentage point lower than Michigan’s.
Income taxes are among the most important factors that influence people’s decision on where to move. It’s imperative that a state who is losing population make itself as inviting as possible for potential in-migration, and having higher income taxes than neighboring states hurts Michigan.
The income tax does more than just entice people. Cutting the state income tax – at the risk of explaining the obvious – increases people’s disposable income. This increase allows people to spend more, stimulating growth in the short term, and increases the incentive for wealthier Americans to save, which stimulates growth in the long term.
Almost more damningly, Michigan has much higher corporate tax rates than its two neighbors. Indiana’s is around two percentage points lower, and Ohio’s doesn’t even exist.
It should go without saying that corporate taxes have disastrous effects on a state’s job growth. The reason should be self-evident. When corporations are forced to pay for making profit, they’re much less likely to grow their operations within that state – it makes them less money. In Michigan’s case, Ohio, who’s right around the corner, has almost no corporate taxes. That affects a company’s decision on where they might expand.
The fact that democrats insist corporate taxes have no impact on middle and lower classes while companies flee their states en masse demonstrates a baffling lack of foresight. Cutting taxes would provide the economic growth that Michigan is starving for, and there’s some evidence that those benefits would hold true even if the state is running a deficit.
The argument for lower taxes can be simpler than all that, though. If people are moving to Tennesse, the Carolinas, Georgia, and Idaho, all states with substantially lower taxes, they’re not moving to Michigan. You don’t have to have the worst tax rate, you just have to be worse than the competition.
However, Michigan’s problems don’t end with taxes. When the number one reason why people are leaving your state is the job market, it’s important to provide proper incentives for the businesses that supply said jobs. Despite CNBC claiming that Michigan is the 9th best state in “business environment”, the reality on the ground hasn’t reflected that.
In fact, companies leaving Michigan in the 1950s caused the downfall of the state’s booming auto industry. So, what’s the deal?
A 2020 study found that, for every one percent increase in labor market freedom, a state gets 2.8 percent more in-migration. Michigan is 38th in the nation when it comes to labor market regulations. The math here isn’t difficult.
Unions have always been an important part of Michigan’s history. In the 80s and 90s, Michigan had some of the highest union participation rates in the country. While that rate has fallen due to Republican control in the mid 2000s, fronting policy like right-to-work and the repeal of prevailing-wage, the state’s union participation always stubbornly persisted past the national average.
Despite the obvious connection between unions demanding higher wages and the inability for companies like GM to compete globally, and despite the fact that factories seemed to magically shut down right after Unions started striking, democrats like Whitmer remain startlingly, and perhaps willfully, oblivious to what’s really stagnating Michigan.
Every single one of the states growing while Michigan declines has lower employment costs.
Due to this lack of opportunity, Michigan’s educated population is emptying out at faster and faster rates, and the more they leave, the more companies follow them. It’s a vicious cycle, and the Whitmer administration is doing nothing to stop it.
Rather than address the lack of opportunity, the governor would rather make the state even less attractive for businesses and individuals alike by repealing right-to-work, reinstating prevailing-wage laws, and raising taxes. Policy isn’t the end-all be-all when it comes to the economy, but it can certainly help, and as long as people like Whitmer are in office, Michigan’s job growth won’t break 0.9%. In fact, it will likely decline.