Economy
1:02 pm
Thu November 15, 2012

The income gap in Michigan: how other states compare

It seems like every time there's a new state-by-state report about poverty, Michigan gets bad marks.

But in a new study about income inequality, the state's doing better than you might expect.

Here's the good news: half of all states have bigger gaps than we do between their richest and their poorest people.

The bad news: that's because in Michigan, the rich aren't getting that much richer. This decade-long recession hitting the state means everybody, across the income scale, has a harder time.

The report comes from the Center on Budget and Policy Priorities and the Economic Policy Institute. 

And it says if you want to help the poorest people in Michigan, lawmakers should lower the sales tax. That’s a regressive tax, which means it takes more money of out poorer people's pockets.

The report also says Michigan should consider raising, or at least maintaining, its income tax. Since that tax takes more from relatively wealthier people, the report’s authors say that revenue should go to schools and job training, which help shrink the income gap. 

But Michigan's income tax is one of the lowest in the nation. It's scheduled to drop even more in the next few years.

Of course, keeping that income tax low is one way the state markets itself to businesses, which lawmakers say helps bring jobs to the state.

Overall, the report [which we’ve linked to below] depicts a national trend that lines up with what we’ve been experiencing in Michigan for years: an erosion of the middle class, as American manufacturing, a decline in union membership, and shrinking wages create big gaps in income.

But here’s the real nugget that stuck out to me during the conference call for reporters about this study. As the income gap widens, poor people and rich people are literally living farther apart. That’s not shocking, of course: in Michigan, we’ve got plenty of examples. Downtown Ann Arbor and Detroit are less than an hour’s drive from each other, but they’re also worlds away.

And if you can’t see poverty, it’s hard to get statewide political will to make policy changes. If it’s not happening to our neighbors, it can be tougher to really get motivated about a solution, however depressing the news stories and stats from reports like this one.  

So how do we solve that? I asked the report’s authors, and they say they hope that the “knowledge economy” we’re currently living in will mean greater, and wider, awareness about these issues. And to a certain extent, that’s probably true: think of all the election discussions about wealth, taxation, and the Occupy Wall Street protests about income inequality.

See what you think about the fuller report on Michigan, and how income is spread across the state, below:

http://www.cbpp.org/cms/index.cfm?fa=view&id=3860