There’s no denying that economic inequality, otherwise known as the gap between the rich and poor, has been increasing in this state and in this nation since the 1970s.
According to a recent piece in Fortune magazine, not exactly a hotbed of radical socialism, inequality has returned to levels not seen since before the Great Depression.
The only other country that has such a large gap between the rich and poor is the gangster capitalist state of Russia. That’s appalling – but beyond being embarrassing, a society headed in that direction is increasingly unstable.
In Michigan, former Gov. Rick Snyder helped make things worse in his first term, when he supported reducing the Earned Income Tax Credit, usually known as the EITC, from 20 percent to 6 percent. This program is not welfare, but a tax break for the working poor.
That’s a program Republicans used to support, because it gives the poor more incentive to work. To qualify, a family of four needs to have an annual income of $45,800 or less.
It was a significant blow to the working poor when they lost most of that credit. Now, however, State Senator Jeff Irwin, an Ann Arbor Democrat, has introduced Senate Bill 107 which would not only restore the old EITC, but raise it to 30 percent.
That, he calculates, would save the average low income family more than $500 a year, a lot of money when you don’t have much. Irwin correctly notes that “there are too many families in Michigan who are struggling to make ends meet while wealthy individuals and corporations buy yachts, fancy cars, and unscrupulous politicians.”
That may be seen by some as an attempt to set class against class, but what the senator said was true. Irwin also introduced Senate Joint Resolution D, an attempt to put the upper house on record as supporting a graduated state income tax.
Why is did this isn’t clear; while having one would be an excellent idea, his resolution is an exercise in futility. Michigan’s state constitution expressly prohibits a graduated income tax. Changing it would require a constitutional amendment, which would involve gathering half a million signatures to get a statewide vote and raising millions.
Republicans have a majority in the state senate, and his resolution would be promptly voted down if it were to come to a vote, which it won’t.
But outside of Lansing, a more promising idea is being floated by Wayne State University Law Professor John Mogk. Almost no one knows more about the City of Detroit’s problems and needs than he does, and he knows the city badly needs more homeowners.
He proposes abolishing the real property taxes on residential homeowners who actually live in the city. As he wrote in a recent issue of Bridge magazine, if that were done “middle class homeowners would be motivated to stay in Detroit, middle class buyers outside of the city attracted to live in Detroit and tax foreclosures … blighting neighborhoods would be ended.”
That would indeed cost Detroit some revenue – but not as much as you might think. According to Mogk, all forms of property tax revenue — residential, commercial and industrial– account for only 13 percent of the city’s entire billion-dollar plus budget.
He suggests that the revenue lost from dropping the residential property tax could be easily recovered in a number of ways, including increasing the tax on commercial and industrial property. No matter how they did it; getting more people, especially middle-class people to buy, live in and fix up homes in the city would be worthwhile at almost any price.
What I do know is this: History has shown that any society with a large and growing income gap between the richest and the poorest is in danger of serious disruption. Or as John F. Kennedy said, “if a free society cannot help the many who are poor, it cannot save the few who are rich.” We’d do well to remember that, before it is too late.
