December 2007 | Commentary | Checking In

One Small Victory

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What were the legislators in Michigan thinking? What started out three years ago as a grass roots voter initiative to simplify tax procedures ended up as a six-percent state tax on warehousing and logistics activities.

Clearly an anti-labor, anti-business, and anti-economic development move by Michigan lawmakers who forgot they preside over the state with the highest unemployment rate in America.

After manufacturing has been under siege for decades—and in some cases drying up, with its desiccating dust blowing to far-off places—the tax-and-spend vampires light on a new victim: the service industry.

Having spent themselves into a $1.6 billion deficit it's no wonder Michigan legislators were after blood in six-percent increments.

Thankfully the business and labor community showed grit and embarked on some strenuous education, helped by a Michigan State University impact study.

Here are some comments from that study:

"My company owns three million square feet of warehouse space in Michigan. We pay $1.5 million in property taxes. When we leave, there will be a severe economic impact on the communities and school districts where we operate."

"Our state, by geography, is not the most ideal location for nationwide logistical operations. Adding a six-percent cost results in one more reason for companies to avoid Michigan altogether."

These observations are just a tipping point.

Consider the potential pyramid impact of the six-percent tax added at each step in the supply chain: a payroll company does work for a carrier; that carrier then does work for a 3PL; the 3PL then works with a 4PL; and the 4PL invoices the manufacturer. Is that a 24-percent tax? Why would anyone pick Michigan?

Michigan lawmakers got the message. The bill was repealed five hours after it went into effect on Dec. 1, 2007, a small victory for our community.

Some states such as Nebraska, Virginia, and North Dakota, among others, understand how our industry offsets a lack of manufacturing sector growth. Nebraska is actually incentivizing companies to locate logistics facilities there and drive sustainable economic growth by producing more jobs.

If nothing else, Michigan's negative example serves as an important lesson for shippers and logistics companies alike: take the time to develop local intelligence sources, join local business groups, and reach out to elected leaders to educate them about the importance of public/private partnerships.

This way, instead of attacking or treating our industry with benign neglect, lawmakers will be motivated to make a genuine effort to support it. Now that would be no small victory.

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