The MC: The Mackinac Center Blog

Vernuccio in Washington Times

Wisconsin at work on right-to-work

Director of Labor Policy Vincent Vernuccio and Brett Healy, president of the John K. Maclver Institute in Wisconsin, coauthored an opinion piece that appeared in The Washington Times. The authors discuss the effects stemming from right-to-work passage in Michigan and Indiana.

Wisconsin is poised to follow Michigan as the nation’s 25th right-to-work state. Earlier this week on Feb. 24, Vernuccio testified before the Wisconsin Senate labor committee in support of right-to-work legislation.

February 27, 2015, MichiganVotes Weekly Roll Call

BB guns (‘Ralphie’s Law’), more corporate subsidies, and more...

Senate Bill 71, Extend, expand job training subsidies to some employers: Passed 37 to 0 in the Senate

To eliminate the $50 million debt cap in a 2008 law that authorized state job training subsidies for particular employers, provided through community colleges. Other bills in the package would make this program permanent, and prohibit companies granted subsidies under a different program (see next bill) from “double dipping” by taking subsidies from both programs.

Who Voted “Yes” and Who Voted “No”

House Bill 4110, Revise school aid budget: Passed 23 to 14 in the Senate

To shift funding sources in the current year school budget to compensate for lower than expected balances in the state general fund. This is due to higher than expected payouts to corporations granted selective “tax credit” deals (often cash subsidies) by the previous administration. The unexpected draw-down of some state accounts comes despite revenue collections actually rising faster than spending this year. The bill also reduces spending to reflect lower than expected school enrollment, and suspends payments intended to “catch up” on underfunding of the school pension system.

Who Voted “Yes” and Who Voted “No”

Senate Bill 34, Revise concealed pistol license procedures: Passed 76 to 34 in the House

To eliminate county concealed pistol licensing boards, and transfer their duties to the State Police and county clerks. Personal protection order provisions that triggered a Governor’s veto of a similar bill last year have been removed.

Who Voted “Yes” and Who Voted “No”

House Bill 4160, Revise firearms “brandishing” law: Passed 95 to 15 in the House

To establish that the crime of illegally “brandishing” a firearm requires it be done “willfully.” Also, that using a firearm to defend one’s home or property under a 2006 law repealing a legal “duty to retreat” requirement is not brandishing. House Bill 4161 clarifies the definition of “brandishing” and passed with just two “no” votes.

Who Voted “Yes” and Who Voted “No”

House Bill 4151, Repeal criminal sanctions for minor with BB gun: Passed 80 to 29 in the House

To repeal a law that makes it a misdemeanor for a minor unaccompanied by an adult to possess a BB gun except in his or her own home or yard.

Who Voted “Yes” and Who Voted “No”

House Bill 4155, Revise firearms definition: Passed 88 to 21 in the House

To revise the definition of “firearm” in the state penal code so it longer applies to BB, pellet, paint ball or “air-soft” guns. The new definition would be a gun that “expels a projectile by action of an explosive.” However, using a non-firearm to commit a crime would still be subject to criminal penalties.

Who Voted “Yes” and Who Voted “No”

SOURCE:, a free, non-partisan website created by the Mackinac Center for Public Policy, providing concise, non-partisan, plain-English descriptions of every bill and vote in the Michigan House and Senate. Please visit

Hohman on Film Incentives

Price tag of $500 million for no industry growth.

Assistant Director of Fiscal Policy James Hohman is quoted by the Detroit Free Press, Grand Rapids Press, Lansing State Journal, WLNS, and on the ineffectiveness of Michigan’s film incentive program. The House Tax Policy committee continues to debate a bill that would repeal the film incentive program.

The state has spent $500 million on the film subsidies and is authorized to spend another $50 million in the current fiscal year. Over the seven years of the program’s existence, the state has gained no permanent film industry jobs.

LaFaive's Minnesota Senate Tax Committee Testimony

Fiscal policy expert shows analysis of cigarette taxes and smuggling

(The following is a transcript of the testimony given by Michael LaFaive, director of the Morey Fiscal Policy Initiative at the Mackinac Center for Public Policy, on February 26, 2015, in front of a Minnesota Senate Tax Committee.)

Good morning. My name is Michael LaFaive and I am director of fiscal policy for the Michigan-based think tank, Mackinac Center for Public Policy. I was invited to speak today by the Minnesota Wholesale Marketers, Grocers and Retailers Associations, respectively.

I am the co-author of national studies on cigarette taxes and smuggling. My colleague, Dr. Todd Nesbit and I, first published a study on this subject in 2008, though our interest in cross-border economic activities pre-dates this work.

Our peer-reviewed statistical study is designed to estimate the degree to which cigarettes are smuggled in the United States. It does so by comparing published smoking rates with legal paid sales per-capita. If smoking rates tell us how much should be smoked but legal paid sales are much lower, the difference must be explained somehow. We believe it is explained by smuggling.

Through calendar year 2013 we estimated that Minnesota’s total smuggling rate was almost 18 percent. Minnesota currently has the 16th highest smuggling rate in our most recent study.

I stress, however, that our most recent study does not yet include the influence of the July 2013 excise tax hike. Our estimate is based on an excise tax rate of $1.60, not the higher cigarette tax rate of $2.83 per pack enacted July 1 2013, nor the automatic increase of another 7 cents per pack on January 1, 2015.  When the higher rate gets factored in next year we expect our estimate for Minnesota’s overall smuggling rate to leap, and dramatically.

To get an idea for the type of smuggling changes that may be reflected in next year’s model update (which would include the 2013 tax hike data) we used our statistical model to run “what if” scenarios for $2.83 and then again for $2.90. Our model told us that:

  • Cigarette smuggling would leap to 32.9 percent of the total market.

That is, of all the cigarettes consumed in Minnesota nearly one-third are illicit. This figure would be higher if we did not subtract out exports to Canada.

I realize this is just an estimate, but if confirmed next year, it would give Minnesota the 5th highest smuggling rate in the nation, displacing Rhode Island in our rankings.

  • When we re-ran the model at the higher excise tax rate of $2.90 the model told us smuggling would increase to 33.7 percent of the market.

That represents a 0.8 percentage point increase year-over-year. If such a figure becomes an annual average increase due to the automatic accelerator Minnesota will easily remain a top five smuggling state.

I know supporters of this hike are very well intentioned. They believe people will quit with higher taxes. They’re right. Theory and evidence show this, too. But not as many will quit as they believe.

Dr. Nesbit and I have pointed to studies that suggests as much as 85 percent of the legal paid sales response to cigarette excise tax increases is a result of tax avoidance and not of quitting. More people are simply getting their nicotine through other — and sometimes more dangerous — sources than are kicking the habit.

Maintaining the automatic accelerator all but guarantees that smuggling and other intended consequences will continue to rise.

Thank you for your time.

How Occupational Licensing Redistributes Income

No benefits to consumers to be found.

The Mercatus Center at George Mason University has a new working paper looking at the effects of occupational licensure in the area of opticians. The results show the problems of state licensing in a variety of areas.

From 1950 to today, it is estimated that the percent of occupations now requiring a license has risen from five percent to 30 percent. In other words, the percent of occupations which require people to pay a fee to the state or take mandated classes has risen six-fold. According to Dr. Morris Kleiner of the University of Minnesota, most of this licensing drives up costs for consumers but does not lead to better health and safety results.

The Mercatus paper, authored by Dr. Edward Timmons and Anna Mills, compares the 21 states which require a license for an optician and those which do not. Opticians are eye care specialists who fit glasses and lenses to correct vision. They do not require a license in Michigan.

The paper finds that licensing causes a redistribution of wealth from consumers to opticians with no observable benefit in health or quality of services. Specifically, the authors write:

“The results suggest that opticians earn 0.3-0.5 percent more for each year that a licensing statute is in effect. In addition, tougher licensing provisions (in the form of more exams or longer education requirements) increase optician earnings by 2-3 percent. In an examination of vision insurance and malpractice insurance premiums, we find little evidence that optician licensing has enhanced the quality of services delivered to consumers. By and large, optician licensing appears to be reducing consumer welfare by raising the earnings of opticians without enhancing the quality of services delivered to consumers.”

This is a fairly common finding, backed up by research from scholars at many different organizations. Licensing should only be required if the public’s health and safety is at risk — otherwise, it simply redistributes wealth from consumers to select special interests.

The Facts on Electricity Choice

Consumers pay a high price for utility monopolies.

Electricity choice in Michigan is under attack again this year. The two big utility companies are investing heavily in an advertising campaign and contract research. Ultimately, they’d like to eliminate market competition and force all consumers to buy only their electricity. The facts are, however, that electricity choice in Michigan has a track record of driving down rates, and electricity consumers will be worse off if the state enlarged the utilities’ monopoly.

Michigan first authorized a choice program with Public Act 141 of 2000. At the time, Michigan’s electricity rates were higher than the national average and higher than any nearby state.

Michigan soon saw the benefits of its choice program. Over the next eight years, electricity rates rose nationally, but less in Michigan compared to the Great Lakes states and the country as a whole. By 2008, the last year in which Michigan had a full choice program, Michigan rates were more competitive with rates in nearby states and had dropped below the national average.

Michigan’s choice program was largely ended in 2008. A new law capped choice at 10 percent of electricity sales, so the big utilities were guaranteed 90 percent of the electricity market. The cap was filled in only a few months, and today electricity consumers seeking an alternative to the utilities were placed on a waiting list. Currently almost twice as many customers are seeking alternative electricity providers than are participating in the choice program.

Michigan rates quickly became less competitive after the cap was imposed. By 2009, Michigan had soared back above the national average. Michigan electricity customers now pay more than customers in any of the surrounding states, and 6 percent more than the national average. Today Michigan residents, employers, and the state economy as a whole are paying a high price for protecting the monopoly status of its large utilities.

There are too many school districts, according to state officials. Even though student enrollment is declining, more school districts open every year, these officials say, putting existing districts under financial pressure.

Though this may seem like a school finance and administrative issue, the “too many school districts” narrative is often used to criticize charter schools. Juxtaposing Michigan’s decreasing enrollment with the rising number of school districts (entirely driven by charter schools) is just a way to complain about the fact that more charter schools are opening.

Charter schools in Michigan are legally defined as “districts,” even though most are single buildings enrolling far fewer students than Michigan's conventional districts.

Madison-Carver Academy, an elementary school serving 300 K-6 students in Detroit, is a “district.” Detroit Public Schools, with close to 100 buildings and serving more than 40,000 students, is also a “district.”

In fact, about 80 percent of charter school “districts” have just a single school building, compared to just over 10 percent of conventional school districts. The truth is, the enrollment/district comparison does not provide any useful information — because it pretends large districts such as DPS are statistically equal to single-building charter schools such as Madison-Carver Academy.

A better approach is to compare school buildings to student enrollment. And there, Michigan is on track. As you can see in the chart below, the total number of school buildings, counting both charter schools and district schools, has followed the same trend as the number of students.

Despite the addition of more than 300 new charter school buildings since 1996, the number of students per school building in Michigan has hardly changed. There were 441 students per school building in 1996 and about 448 now — a mere 1.5 percent increase. There is only a small difference between charters and conventional schools: 407 students per charter school building and 453 per district school building.

State officials should worry less about the quantity of public schools and more about the quality of educational options available to Michigan families.

Right to Work Isn't the Only Option

‘One or none’ also gives workers, unions choice

Even with Michigan’s right-to-work law, workers do not have full freedom. In bringing true fairness to both unions and workers, Michigan has the power to give public workers a complete choice when it comes to associating with a union, while at the same time lifting government unions’ burden of representing nonmembers.

In Michigan, unlike non-right-to-work states, workers do not need to pay a union to keep their jobs.

However, in both right-to-work and non-right-to-work states, employees in a unionized job must accept union representation whether they want it or not.

But right-to-work isn’t the only option available for bringing real fairness to the workplace. In a few short weeks the Mackinac Center will publish a study introducing a concept called “one or none,” which would allow workers to fully opt out of union representation and represent themselves.

As I detailed in a 2013 op-ed in the Detroit Free Press, opponents of right-to-work attempt to make it an issue of either/or. They claim either unions will have to represent workers who are not paying them or that workers will have to pay for unwanted representation.

Some opponents even go as far as calling workers who opt out of union representation “free riders.”

However, Terry Bowman, a United Automobile Workers member and president of Union Conservatives, says there is a better term for this kind of worker: a “forced rider.”

Forced riders have to accept the contract the union negotiates. And in most cases, if a worker under this contract has a problem, they must go through the union to address it with their employer.

But states have the ability to solve the forced-rider problem, at least for public employees. Unlike private-sector collective bargaining, which is governed by federal legislation, public-sector collective bargaining is governed by state law.

Lawmakers could simply amend state law to allow workers who do not want to associate with a union to opt out and represent themselves.

Instead of doing away with exclusive representation, a one-or-none policy could be adopted.

One-or-none legislation would not disturb the normal exclusive bargaining relationship between public employers and unions. Unions would still need to get a majority of workers to agree to representation and the one union would be the only representative in the workplace. This union would still negotiate for all unionized employees and nothing would change in terms of collective bargaining.

However, employees who do not want to be in the union would be free to represent themselves. They would not have the ability to create a minority union or create multiple unions at a workplace, but instead would be treated as normal non-union employees.

Public workers would finally be given a true choice of whether to associate with a union, accept representation and pay for it. A one-or-none law would also alleviate one of the main problems unions have with right-to-work, which is representation without pay.

If unions are doing a good job and representing their members well, nonmembers would be willing to pay for their services.

Right-to-work opponents maintain that “free riding” is unfair. While forced riding is unfair for both workers and unions, mandating that someone pay for something they do not want from a private third party simply to keep their job is a greater injustice.

The best option is to give workers the chance to say “no thanks,” and unions the ability to say “goodbye.”

(Editor’s note: A version of this article appeared on the Illinois Policy Institute Blog.)

February 20, 2015, MichiganVotes Weekly Roll Call

Guns, drones and votes. Subsidies ate the budget.

Senate Bill 54, Ban using a drone to interfere with hunters: Passed 38 to 0 in the Senate

To prohibit using an aerial drone to interfere with or harass a person who is hunting. This would expand an existing law that bans interfering with or harassing hunters. Senate Bill 55 bans using a drone for hunting and also passed unanimously.

Who Voted “Yes” and Who Voted “No”

Senate Bill 53, Expand “gun free zone” concealed pistol exception: Passed 37 to 1 in the Senate

To revise the “gun free zone” provision of the concealed pistol permit law to exempt retired federal law enforcement officers who carried a firearm during their employment. This provision prohibits regular citizens who have received a permit after meeting the background check and training requirements from carrying a pistol in specified places including schools, bars, restaurants, churches, arenas and more.

Who Voted “Yes” and Who Voted “No”

House Bill 4110, Revise school aid budget: Passed 62 to 48 in the House

To shift funding sources in the current year school budget to compensate for lower than expected balances in the state general fund. This is due to higher than expected payouts to corporations granted selective “tax credit” deals lasting up to 20 years by the previous administration (in many cases these are actually cash subsidies). This unexpected draw-down in some state accounts is happening despite revenue collections actually rising faster than spending this year. The bill also reduces previously authorized spending to reflect lower than expected school enrollment, and suspends payments intended to “catch up” on underfunding of the school employee pension system.

Who Voted “Yes” and Who Voted “No”

Senate Bill 44, Hold GOP presidential primary on March 8, 2016: Passed 72 to 38 in the House

To hold the Republican presidential primary election on March 8, 2016, rather than Feb. 23 as currently authorized.

Who Voted “Yes” and Who Voted “No”

SOURCE:, a free, non-partisan website created by the Mackinac Center for Public Policy, providing concise, non-partisan, plain-English descriptions of every bill and vote in the Michigan House and Senate. Please visit

From 1995 to 2011, Michigan ran a program that granted special tax exemptions to chosen companies. The research on this program – the Michigan Economic Growth Authority – has been pretty consistent: It was a failure.

The Mackinac Center did two studies on MEGA; a 2005 study showed that the few jobs “created” from the program were temporary and expensive and a 2009 study found that it had an overall negative impact on Michigan’s economy. The Michigan Office of the Auditor General has found repeated problems with state “economic development” programs over-promising and under-delivering. The Anderson Economic Group found a negative impact on job creation. The only favorable study was done by the Upjohn Institute, but even that found only a very small positive economic effect and that the actual MEGA program was almost incidental to the state’s economy. A recent review of the program showed that only 2.3 percent of the projects given tax credits ever met their job projections.

Though the program was ended in 2011, it lives on. Michigan taxpayers are on the hook for up to $9 billion over the next two decades because of credits handed out over past years. This will cause a continuing hole in the budget.

So what is the defense of the Michigan Economic Development Corporation?

MLive business columnist Rich Haglund, who has written positively and critically of its programs in the past, offers one up. In a recent article, he says that when former Gov. John Engler eliminated some “economic development” programs in the early 1990s, Michigan “quickly gained a reputation for having unilaterally disarmed in the war among the states for jobs.”

He adds: “[T]he agency offers some valuable programs, particularly those that aid entrepreneurs and community development. And it has tight linkages with local economic development agencies, which would suffer if the state sacked the MEDC. The reality is that the states are engaged in a costly battle of their own making for jobs and business investment. Unless this war is somehow ended, it would be unwise for Michigan to disarm again.”

This is mostly anecdotal and even Haglund admits in the piece, “[The MEDC’s] overall impact on job creation is arguably minimal.”

Besides the fact that the bulk of the research shows poor economic effects from Michigan’s programs, there are two main reasons the state should not be in the business of deciding which companies get special favors and which have to pay to subsidize their competitors.

First, centralized planning just doesn’t work. This is because of the “economic calculation problem” developed by Ludwig von Mises. In short, no centralized actor (even a large and democratically elected one like a state government) can possibly have more knowledge than the market as a whole, which means attempts at “economic development” will most often do more overall harm than good because it will misallocate resources away from their most productive use.

Second, government programs tend to expand beyond their core mission. While the MEDC and MEGA started as small, focused programs, they quickly grew larger. During the administration of former Gov. Jennifer Granholm, the agency expanded into all kinds of areas, with bipartisan support. Today, much of what was done is widely recognized as having caused more economic harm than good. It’s good that MEDC has shrunk – but that doesn’t mean it will stay that way.

The MEDC does more political development – helping politicians look good – than economic development. The state should end it.