Report says a flatter tax model, budget cuts have helped the hard-hit industrial state get back on track following the 2008 recession
TORONTO, Ont.—It may not be the state that first comes to mind when brainstorming economic powerhouses, but a new Fraser Institute report says to foster growth in its manufacturing industry, Ontario should be looking across Windsor, Ont.’s Ambassador Bridge.
Michigan, the study says, has made significant strides over the past five years, and has a number of lessons to offer its north-of-the-border neighbour.
“Michigan and Ontario have a lot in common, but while Michigan has revived its manufacturing sector since the recession, Ontario’s manufacturing sector has struggled,” Ben Eisen, the study’s co-author and director of provincial prosperity studies at the right-leaning think tank, said.
While the report admits the Wolverine State lagged behind much of the rest of the U.S. in the early part of the 21st century and was particularly hard-hit by the 2008 recession, it says since 2011 Michigan policy reforms have helped fuel manufacturing growth.
“In the face of daunting challenges, Michigan took charge of its economic future by implementing an ambitious reform package that has coincided with job growth and a lower debt burden,” the study’s other co-author, Robert Murphy, said.
“Although there are some factors beyond direct provincial control that influence economic performance, policy choices matter and Ontario should take note of Michigan’s reforms and its economic turnaround,” he added.
Among the changes, the state government replaced the “onerous” Michigan Business Tax with a simpler, flatter tax of six per cent and implemented budget cuts to balance its budget—a sharp contrast to Ontario that has continued to add to its debt.
The report says the resurgence of the region’s manufacturing sector allowed slumping employment in the industry segment to bounce back. While Michigan added 6.1 per cent to manufacturing employment between 2011 and 2014, Ontario’s manufacturing workforce shrank at 0.5 per cent per year over the same time period, according to the study.
You can read the full report here.