How to kill a business tax

Here's the bad news: There are no easy answers to solve the state's looming $400 million shortfall.

But the good news is, there's an obvious way to slay the much-maligned Michigan Business Tax surcharge. The Legislature rushed this 19.99 percent levy on top of the new MBT late last year in the frenzy to dump the service tax, which was deemed even worse.

The surcharge is now the bane of business owners' existence, with 9 percent telling the Michigan Chamber of Commerce they're considering leaving the state over it.

Senate Republicans have passed legislation killing the surcharge and promise to balance the budget with magical budget cuts yet to be revealed. While that might make Chamber members feel warm and fuzzy inside, it's akin to doing nothing because there's no deal with the governor or Democratic House.

Meanwhile, the credit crunch is smacking around our battered economy even more and unemployment is certain to veer into double-digit territory soon.

Republicans are right: We can't afford to keep a job-killing tax.

So I'll defer to an idea proposed by two GOP lawmakers, Reps. Chris Ward, R-Brighton, and Lorence Wenke, R-Richland. Let's snuff out the surcharge and up the income tax a bit, say between 4.6 and 4.8 percent. That'll cost the average family about an extra fill-up a year.

The time to do it is now, because as the deficit balloons next year, any kind of tax cut will be off the table.

Unfortunately, the odds of this happening are nil. Senate Majority Leader Mike Bishop, R-Rochester, isn't budging from his no-tax stance, even if it'll squeeze the business community. House Speaker Andy Dillon, D-Redford Township, is skeptical.

"We'd be sending the message that we're increasing people's taxes to cut business taxes," Dillon told me. "I was willing to do that a year and a half ago. So if Mike Bishop can find those votes and wants to send something over, he's welcome to."

It's true that Bishop could have OK'd this deal during last year's budget crisis and we wouldn't here today.

But the plan hatched by Michigan Republican Party Chair Saul Anuzis and House Minority Leader Craig DeRoche (dear God) was to force as many Democrats as possible to vote for tax increases. That was the key to a GOP victory in '08.

So what was their plan to solve the $1.8 billion budget crisis? There wasn't one.

Astute readers will recall that Republicans actually lost nine House seats on Nov. 4. And the much-ballyhooed recall campaign failed miserably.

Not one legislator lost a seat over the tax hikes. Not one.

Ward just shakes his head. "Not only did we have bad policy, but it turned out to be bad politics, too."

Of course, Ward did lose. Not his seat - he's term-limited - but his GOP leadership post for being a grown-up willing to deal with the pagan Dems to get more budget cuts, less taxes and more reforms.

Oh, well. I'm sure the Chamber doesn't mind. Neither do business owners slapped with 1,700-percent increases in their tax bills.

Negotiating is for sissies.

Anyway, back to this year's budget mess. What's that you say? Can't we just cut fat out of the budget? I'm with you, brothers and sisters.

The income tax for surcharge was really Plan B. What Ward would actually like to see is cutting Corrections (which eat up $2 billion of our $9 billion general fund) in exchange for the surcharge. Gov. Jennifer Granholm first proposed the swap this summer, but she didn't provided specifics.

Now we have the blueprint, thanks to the $800 billion in cuts proposed by the economic development powerhouse, Detroit Renaissance. That's even more than what the surcharge generates, which is about $600 million this year and more than $700 million in years to come.

"It was something that we should have done during the budget crisis," Ward said.

Amen. Unfortunately, leaders don't want to take on politically unpopular reforms ranging from sentence guideline reform to shuttering prisons. Even the governor said it would be impossible to do everything in the last few weeks.

Corrections is the logical place to start. It's the one area of the budget that's been spared from the chopping block. Our prison population has soared by 538 percent in the last three decades and costs have skyrocketed 5,000 percent, according to the nonpartisan Citizens Research Council. With more than 50,000 inmates, Michigan has the highest prison population in the Midwest. The cost of a year in prison is $30,000 per inmate.

Clearly, something has to be done.

This will be the battle of 2009, make no doubt about it. And everyone, from Granholm to lock'em-up Sen. Alan Cropsey, R-DeWitt, is sure grateful that a third-party group, the Council of State Governments, will be issuing a report with cuts they can hide behind.

Everybody claims credit for a tax cut. But nobody wants to be associated with cuts that could let the bad guys out (and more importantly, be used in political ads against them).

Looks like this budget battle could turn out to be as much fun as last year's. Lucky us.

The Republicans' Rosetta Stone

Behold, Republicans. The Rosetta Stone for your demise has been unearthed right here in Michigan.

After last week's bloodbath, conservatives are desperately trying to decipher exit poll data and county-by-county vote tallies for answers as to what went wrong. But the key to Republican renewal is right in front of us.

Let's journey to the 7th Congressional District, that swath of rural rugged individualism from the Lansing suburbs to the Indiana-Ohio border. The district was designed to be the most Republican in the state, but come January, a liberal Democrat will represent it in Congress.

State Sen. Mark Schauer, D-Battle Creek, toppled Republican U.S. Rep. Tim Walberg 49 to 47 percent on Nov. 4. True to his petulant nature, the soon-to-be-ex-congressman waited well into the next day to concede, I'm told, although the results were clear.

How did this happen? Ask Joe Schwarz.

Back in 2004, the centrist eked out a GOP primary win for an open seat against Walberg and four other cookie-cutter conservatives. Schwarz's bipartisan appeal earned him 58 percent of the vote in the general.

The Battle Creek physician and 16-year veteran of the state Senate was ranked one of the top 10 most effective freshman members of Congress. He trekked home every weekend, hitting the pig roast circuit in the southern counties like Lenawee and Hillsdale that regarded him with suspicion, despite his conservative bona fides as a decorated Vietnam War veteran and CIA operative, who among other things, helped save Indonesia from a violent Communist coup.

Walberg, a faceless former state rep and Bible salesman, spied an opening. No one could beat Schwarz in a general election - that was clear - but GOP primaries are odd, cloistered contests that disproportionately draw the far right.

Bingo.

With a little help (say, about $1 million) from the anti-tax smear machine Club for Growth, Wally was in business for '06. The Club reduced Schwarz to a caricature, an "embarrassingly liberal" dude who liked nothing better than dispensing Viagra to bums on welfare. As an evangelical preacher, Walberg took care of the church crowd, warning that the good doctor was a baby-killing gay lover out to steal our guns.

Schwarz wasn't helped any when he had to take controversial votes on issues like gay marriage, which he said was redundant. So why did former Majority Leader John Boehner allow that to come to the floor? Why didn't the Michigan Republican Party and the National Republican Congressional Committee sit Timmy down and tell him to butt out?

Because the truth is, the Republican machinery is controlled from top to bottom by right-wing activists. And they like Walberg's politics a lot more than Schwarz's. The seat will always stay Republican, they reasoned, so why not trade a maverick for a foot soldier?

In the end, it wasn't even close. Walberg won by 6 points. But the darling of the far right couldn't even break 50 percent that fall against Sharon Renier, an organic chicken farmer with $1.03 in the bank.

"You're just setting this seat up for Mark Schauer to win it in 2008," warned Schwarz aide Matt Marsden, who was promptly mocked for having sour grapes.

One of the cynics, columnist Brad Flory, conceded this week in the Jackson Citizen Patriot, "Those Schwarz people look like geniuses now."

You betcha.

This year, Republicans lost another crop of moderates thanks to Club for Growth's scorched earth tactics, including U.S. Rep. Wayne Gilchrest in Maryland and U.S. Rep. Heather Wilson in New Mexico.

Enough is enough. The GOP needs a moratorium on primarying incumbents, stat.

The holy grail of ideological purity has proven to be the priciest of illusions. The number of seats lost because the GOP no longer appeals to moderate, suburban voters is staggering. Many centrists have fled the party (Schwarz is a Republican-leaning independent who endorsed Schauer), thus robbing the GOP of institutional knowledge critical to rebuild.

Indeed, much of the brain trust - Colin Powell, former U.S. Sen. Lincoln Chafee, former Rep. Jim Leach - are odds-on favorites to join the Barack Obama administration.

Sadly, there are few grown-ups to tell the right-wing rapscallions to put down the Pop Rocks and come down from the sugar high of deliciously divisive politics. They don't work anymore.

Karl Rove ain't the messiah -he's just another washed-up pundit on teevee who's fallen into the trap of insisting elections can be won with the same nasty tactics from his glory days. Electorates change. Politics change. The Republican Party needs to be nimbler and more inclusive to survive and flourish.

So where's the party heading in Michigan? State Sen. Alan Cropsey, R-DeWitt, a close ally of Walberg and a Bob Jones University grad, reportedly has the answer to the GOP's woes in '10.

Why, a ballot question banning gay adoption, of course.

Now, I could show him the data that initiatives don't drive up the vote unless it's on affirmative action (and that's already been done, folks).

But Cropsey undoubtedly has God on his side. And Democrats from Grosse Pointe to Grayling are hoping he keeps the faith.