Saturday, March 22, 2008

Michigan Should Become A Right-To-Work State To Spur Economic Development In Detroit by Akindele Akinyemi

How does Michigan's business climate compare with other cities across America? The short answer: "horrible."

There are two factors that can help Michigan become a competitor again: the state's status as a right-to-work state and the lack of a state income tax.

First Michigan must become a right-to-work state, which means that the government does not force employees to join a union or pay dues in order to work at companies with labor unions. States with compulsory unionism face more work stoppages, a smaller pool of qualified workers and, generally, more regulations for business owners. This translates into decreased efficiency and productivity. As a result, right-to-work states like Tennessee have a tremendous competitive advantage in attracting business owners since they can avoid union-generated regulatory snags while enjoying a more dynamic, flexible workforce.

Michigan also should consider getting rid of personal income tax. The lack of a personal income tax would make it among the most business-friendly states in America. A personal income tax can be particularly agonizing for small business owners. Nearly 90% of businesses—such as sole proprietorships and partnerships—file taxes as individuals, paying personal income tax rates rather than business tax rates. Naturally, then, a state with no personal income tax is a haven for enterprising small businesses.

Michigan should become a right-to-work state because it would be a sure-fire recipe for a welcoming business climate. Therefore, urban areas like Detroit would be transformed into an international financial market like Hong Kong.

The city must address its economic development policies that often do more harm than good to the business climate of the city of Detroit. Each year, Detroit's elected official dole out millions in corporate welfare in hopes of luring new business or expanding existing companies. Yet these business subsidies rarely fuel economic growth since they generally fund expansions or relocation's that would have taken place even without a dime of taxpayer-funded government incentives.

Detroit leaders turn a blind eye to the troubling fact that economic development is nothing more than bribery made possible because the government plunders the profits of many less fortunate—and less well-connected—companies to favor a chosen few. Instead of stealing from one company to subsidize another, the state's "economic development" policy should consist of developing the economy through low tax and regulatory burdens for all businesses.

Detroit's welcoming business climate was not created by what city government does. Instead, it is a result of what city government does not do, such as tax income or protect sluggish unions from competition. If Detroit leaders want Detroit to become even more hospitable for both new entrepreneurs and existing businesses, they should do even less: spend less, regulate less and tax less. If city government can get out the private sector's way, the city may soon also be acknowledged as America's "Most Business-Friendly City," as well.

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