Pure Michigan

Oh, Michigan. You make me laugh.

Recently, a series of "Pure Michigan" commercials started playing in prime time on channels I usually watch; they depict tourists golfing, boating, enjoying Michigan's more idyllic scenery and Detroit(?!!) They must have found the one day out of the year to film that it's not covered in ice or raining. But I digress.

It's not uncommon for states to advertise, as I see commercials for California tourism all the time ("When cahn you staht?" ~ Arnold). But there are other commercials showing folks like Jeff Daniels touting Michigan's economic development. And when I picked up a recent Inc. magazine, inside was a full-page ad for the "Michigan Advantage". It's pretty clear that someone thinks Michigan's road to recovery leads through advertising to small businesses. It makes total sense -- small businesses create jobs, and jobs create stability and prosperity.

But marketing isn't the problem here. People know Michigan is still there. They know its economy is in shambles. Why wouldn't businesses zoom in to take advantage of low rents, cheap labor, and the venture capital / loans Michigan is offering? Not to mention the very tasty cherries?

The real problem is the Michigan Business Tax, and its predecessor, the Single Business Tax, which was so bad that voters repealed it. It's common knowledge that these taxes are...significant. Businesses that are at all successful don't want to move to (or start in) a location with taxes that are higher than other states' -- this shouldn't be a surprise. Michigan, your taxes are too high compared to other states' to attract entrepreneurs.

But what about the economic venture funds and loans they advertise? Here's a news flash: other states have more extensive and accessible venture capital markets. If I were starting an alternative energy company, why wouldn't I locate where there is significantly more VC (and more sun/wind), like Silicon Valley? And typically, businesses don't take their venture funding to pay taxes either.

It's not an easy position to be in: the state has to balance taxing small businesses and large automakers. But either you're moving forward or you're not. Here's a crazy idea: increase taxes on sacred-cow automakers (who are laying off and on their way out of the state anyway), and lower/eliminate taxes on small businesses. Is that too naive?

Tourism is great and brings money to the state, but it's seasonal and is only likely to appeal to staycationers from nearby. Instead of running commercials to come and play golf in Michigan, perhaps the state should save the money and lower taxes on small businesses to be competitive with more business-friendly states like Nevada or North Dakota.

Michigan, I will still enjoy your tourism commercials with a good laugh. Let's hope hunting licenses make up for all of the small businesses starting elsewhere instead.