Taxation

MI Flunking On Taxation, Regulation?

Michigan earns an "F" on issues of taxation and regulation among corporate CEOs.

This according to the publisher of Chief Executive Officer, a publication that annually surveys CEOs about the best and worst states to do business.

"On taxation and regulation, Michigan gets rated by the CEO community an F," said Ed KOPKO, chairman and CEO of Chief Executive magazine. Kopko provided that unpublished tidbit while responding to a question about what specifically Michigan can do to move up as a site location among corporate leaders.

Kopko said the "F" rating was a series of questions the magazine asked during their most recent survey to get more into the problems CEOs had with various locales as the possible site of investments or expansions.

On work force quality, Michigan netted a C+. Among best-ranked states, Texas was number one. On worker quality, Texas netted a B+. Kopko noted that part of that grade difference is unionization.

Kopko argued that the real creators of jobs are not state or national politicians or government-run programs, but the CEOs of businesses that have to make expansion and investment decisions based on cost.

"What gets lost in the reporting, is that CEOs actually have a fiduciary responsibility to run their businesses in the most effective way," Kopko said.

The Chief Executive Officer publisher noted that studies have indicated that employing two different people with the same experience and skill-set, one in Texas and one in Michigan, results in an additional $5,000 per year cost for the Michigan-based employee over the Texas worker.

"You multiply that by thousands of people and that adds millions and millions to your cost structure," said Kopko, adding that among the comments made by surveyed CEOs was this gem: "Move to Texas where it's warmer and the business climate is great."

Kopko noted that the decision earlier this year by Volkswagen to build a new plant in Tennessee, as opposed to Michigan, was a "clear sounding message to the state of Michigan."

"To the extent that there is something you guys should be winning, here it is, an auto expansion," Kopko said. "You lose something [with VW] that's right in your wheel house. It's kind of like the team that is constantly at the bottom of the standings and they say 'we're going to keep playing the same team and keep applying the same standards all over.'"

Kopko tried to warm up the by-now-depressed audience of business executives by telling them he's not anti-Michigan, he's just reporting what the nation's CEOs have said during the magazine's survey.

So what's to be done? Kopko said systematic change from the ground up.

"You've been losing the battle for a number of years now and at some point, you as a population will say 'we have to do something more aggressive than doing the same old thing' and things will turn around," he remarked.

Kopko added that CEOs are saying there needs to be a significant overhaul in the "political environment with taxes and regulation and they don't view Michigan as having the leadership to do it."

He also warned not to tinker around the edges.

"The only way you're going to win is if you set up a system where you're not incrementally moving up the list from 49th, to 48th and then to 43rd," Kopko said. "You're still 43rd. Can you imagine yourself going into a store and you have 19 different brands of a product and you select the 18th best, which is also more expensive? You need to do a major call to arms. You need to change your tax structure, you need right to work, you need to work other costs out of your system or you're destined to be at the bottom of the list."