As Washington begins to debate tax reform in earnest, states can provide instructive policy lessons for better and sometimes worse—see the fiscal crack-ups in Connecticut and Illinois. Michigan, on the other hand, offers a case study in the pro-growth potential of business tax reform.

Former Michigan Democratic Gov. Jennifer Granholm was a progressive specialist in using the tax code to politically allocate capital, which depressed and distorted business investment. Between 2002 and 2007, Michigan was the only state to experience zero economic growth.

Ms. Granholm’s Republican successor, Rick Snyder, recharged growth with tax and regulatory reforms. While Michigan’s GDP has been expanding at roughly the national average since 2011, it has led the Great Lakes region.

Michigan slipped into recession in 2003 as manufacturing contracted, which unions blamed on China and free-trade agreements. But misguided policies were arguably bigger contributors to Michigan’s slump. Between 2002 and 2007, Michigan’s manufacturing grew at a third of the rate of the Great Lakes region. During this period, motor-vehicle and parts manufacturing in Indiana increased five times as much as in Michigan. And Indiana’s economy is nearly as dependent on vehicle production as Michigan’s.

Read more at The Wall Street Journal….

Leave a Reply