Granholm, Cox offer contrasting budget plans

Gov. Jennifer Granholm, currently locked in negotiations with Republicans in the state senate in the hope of reaching a compromise to on the FY2009 budget, released her proposal for how to fund the government for the next two years. Attorney General Mike Cox, who is running to take her seat in 2010, offered his own plan for how he would help Michigan’s economy and solve the budget crisis if he wins the governor’s mansion next fall. The two plans could hardly be more different.

Granholm, facing a nearly $3 billion shortfall and required by the Michigan constitution to balance the budget, has proposed a combination of spending cuts, tax increases and reductions in tax exemptions.

In all, Granholm’s plan would raise $685 million in new revenue, and slash $572 million in spending.

To cover a projected $2.8-billion deficit next fiscal year that starts Oct. 1, Granholm would use $973 million from federal stimulus money the state is due.

Granholm’s plan would raise the cigarette tax by 25 cents per pack – up from the current $2 per pack – and double the state tax on non-cigarette items such as cigars and loose tobacco.

The plan would eliminate numerous tax exemptions and deductions for businesses. It would reduce the earned income tax credit and freeze the personal exemption on income taxes.

Cox, on the other hand, is proposing a huge tax cut as the solution to Michigan’s economic woes:

The ideas include a $2-billion business and income tax cut during his first year in office, and steep cuts in the cost of public employee benefits. Michigan taxpayers could save more than $700 million a year almost immediately if the Legislature and government enacted employee benefit policy changes, Cox said at a roundtable discussion with Capitol reporters…

Cutting taxes, which Cox announced earlier this year would be his first priority as governor, is critical if Michigan is to change its image as a bad place to do business, he said.

But other than the $700 million in supposed savings from a public employee health plan similar to the one proposed by House Speaker Andy Dillon — savings that are disputed by public employee unions — Cox did not identify any other spending cuts that might make up for the $2 billion in revenue cuts. And that’s not even counting what would be needed to close the FY 2010 budget deficit projected by the Senate Fiscal Agency.

In fact, according to the Detroit News, Cox promised spending increases, saying he would “restore funding for higher education and the Michigan State Police.” A $2 billion tax cut and no specific spending cuts? Easy promises to make when you’re not the one who actually has to balance a budget already facing a multi-billion dollar shortfall in revenue.