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Tag Archive | "Mackinac Center for Public Policy"

Give Michigan drivers relief from high auto insurance premiums


 

Michigan drivers pay above-average prices for auto insurance.

Michigan drivers pay above-average prices for auto insurance.

By Michael Van Beek and Matt Coffey, Mackinac Center for Public Policy

A new legislative session kicked off in January, and once again, there’s talk in Lansing about reforming auto insurance in Michigan. This is a perennial issue: Since 2001, legislators have introduced 340 bills about auto insurance regulations, according to MichiganVotes.org. But like drivers in the Indy 500, lawmakers keep going around in circles without getting anywhere. This pattern needs to stop and policymakers should fix the problem.

The interest in reforming auto insurance stems from a well-known fact: Michiganders have the regrettable privilege of paying some of the highest premiums in the country. According to research from the National Association of Insurance Commissioners, the average annual premium in Michigan was $1,351 in 2014, second only to New Jersey and Louisiana and 37 percent more than the national average.

Bad drivers aren’t to blame for Michigan’s abnormally high auto insurance premiums. After all, Michiganders can navigate the most miserable conditions, thanks to our winter wonderland. When a snowflake falls in Atlanta, on the other hand, there are ditches full of cars and highways are backed up for miles.

What is to blame, however, are Michigan’s unique auto insurance laws. The state’s no-fault approach is similar to that of just 11 other states, and no other state forces all drivers to buy unlimited personal injury protection.

Michigan’s current auto insurance system was created in 1973, and a solid case can be made that it has been, by and large, a failed experiment. For instance, the no-fault system—which gives insurance benefits to anyone injured in an auto accident regardless of who was to blame—was meant to reduce litigation. Since the law guarantees insurance benefits for all accident victims, the theory goes, there should be fewer lawsuits, reducing costs for both insurance companies and the courts.

That’s not what’s happened in practice. Michigan still allows an accident victim to sue an at-fault driver if a certain threshold for injuries is met. The Michigan Supreme Court has interpreted the law in a way that lowers this threshold—effectively undoing what no-fault set out to achieve. The result is that Michigan drivers pay a hefty premium for no-fault protection but don’t really benefit from it. Not surprisingly, Michigan ranks as one of the most litigious states in the nation, according to the Pacific Research Institute.

The failed no-fault system is only half the problem. Requiring insurers to provide unlimited PIP is even more problematic. It’s easy to figure out how this approach contributes to astronomical insurance premiums, why it’s rife with abuse and why no other state uses it.

With no limit on what insurers must cover, anyone injured in an auto accident can seek and “afford” the most expensive treatment possible. What’s worse: While private insurance, Medicare and Medicaid have fee schedules that limit what medical providers can charge, there are no schedules for what they can charge for services they provide to accident victims. That’s why it’s common for hospitals to charge auto insurers significantly more than they charge medical insurers or Medicaid and Medicare for exactly the same service.

The generous benefits available through Michigan’s unlimited PIP system, as might be expected, attract those who see an opportunity for profit. For instance, unlimited PIP covers paying a caregiver to serve accident victims in their own homes. There are very few limitations on who can provide this care and, again, there is no fee schedule. As a result, family members of accident victims can and do bill auto insurers for 24 hours of care each day at hourly rates as high as $30. That works out to be a nice six-figure salary. While it is unlikely that this is the norm for those providing home-based care, the opportunity for abuse is clear.

Considering these problems with Michigan’s auto insurance system, one might wonder why nothing has changed. After all, each lawmaker has thousands of constituents who are harmed by these steep premiums. The answer to this riddle is what economists call “concentrated benefits and diffuse costs.” The status quo provides concentrated benefits to medical providers, attorneys and accident victims, and they will spend significant resources lobbying the Legislature to protect these benefits. The costs, meanwhile, are diffuse, paid by drivers all across the state. Diverse and unorganized, drivers’ voices are easily drowned out by the loud, coordinated and well-funded voices of those who defend the status quo.

It’s time to admit that our no-fault auto insurance system has largely failed. As a result of court rulings, it has strayed from its original purpose and its promised benefits have not materialized. For the sake of Michigan drivers, policymakers need to overhaul it and make our state competitive again.

The Mackinac Center for Public Policy is a nonpartisan research and educational institute dedicated to improving the quality of life for all Michigan citizens by promoting sound solutions to state and local policy questions. The Mackinac Center assists policy makers, scholars, business people, the media and the public by providing objective analysis of Michigan issues. Visit them online at www.mackinac.org.

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Michigan should end civil asset forfeiture


 

Require a criminal conviction before taking people’s property

By Jarrett Skorup, Mackinac Center for Public Policy

Lansing began 2017 on the right foot by enacting a law to make it easier for people to try to recover property seized through civil asset forfeiture, but the state should end the practice altogether.

Last week, the Mackinac Center for Public Policy and the ACLU of Michigan issued a joint press release applauding the Michigan Legislature and Gov. Rick Snyder for passing and signing into law House Bill 4629. The new law removes the requirement that a person pay a bond equivalent to 10 percent of the value of their property seized through civil asset forfeiture if they want to try to get it back.

“This new law will further protect the constitutional rights of citizens,” said Jarrett Skorup, a policy analyst at the Mackinac Center. “But Michigan needs to do more. Twelve states require law enforcement to get a criminal conviction before forfeiting property and two – New Mexico and Nebraska – have banned civil forfeiture altogether.”

Skorup spoke with ABC 12 this week about the case of a Genesee County man whose property was seized by a Saginaw County detective in 2014.

“All we know is the police never pressed charges against him, never convicted him, yet they ended up with over $20,000 in cash and some of his property, and that should raise a lot of eyebrows for people,” Skorup said.

Now, a Saginaw County deputy is suing over the matter, saying the sheriff’s department retaliated against him after reporting the seized money was used for confidential informant drug buys.

Since 2015, the State of Michigan has passed several reforms to limit how police may seize property. The standard of evidence required to take property is now higher, and the process is more transparent.

“Previously, if they wanted to forfeit someone’s stuff, it was based on a very low standard of evidence, and they’ve raised that a little bit higher,” Skorup told WSJM. “However, they still aren’t requiring that someone be convicted of a crime in order to take their stuff and forfeit it over to the state.”

Skorup added that a number of incoming legislators are interested in further reforming Michigan’s civil forfeiture laws.

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New study: No correlation between school spending and student outcomes


Study finds spending more on Michigan schools doesn’t increase achievement

MIDLAND—There is no statistically significant correlation between how much money Michigan’s public schools spend and how well students perform academically, according to a new empirical study by the Mackinac Center for Public Policy and an assistant professor of economics at the University of Colorado-Colorado Springs.

The study’s findings align with the bulk of academic research on the subject, but does so with a unique and detailed data set of Michigan’s public school spending and academic achievement. The data comes from more than 4,000 individual public schools in Michigan and covers seven years’ worth of detailed expenditures and test scores for elementary, middle and high school students. The test scores were from the years 2007 through 2013. Using school-level data, as opposed to district-level data, enabled a more precise examination of the relationship between spending and performance.

“Of the 28 measurements of academic achievement studied, we find only one category showed a statistically significant correlation between spending and achievement, and the gains were nominal at best,” said Mackinac Center Education Policy Director Ben DeGrow, who authored the study along with Edward C. Hoang, a professor of economics at the University of Colorado at Colorado Springs. “Spending may matter in some cases, but given the way public schools currently spend their resources, it is highly unlikely that merely increasing funding will generate any meaningful boost to student achievement.”

The study comes as the state awaits the completion of a now-overdue school funding “adequacy” study it paid a Denver-based firm $399,000 to complete by March 31, 2016; that study is now due by May 13, 2016. School funding adequacy studies are common across the country and nearly all of them (38 of the 39 performed between 2003 and 2014) recommend funding increases.

“The state’s school spending adequacy study is sure to conclude additional tax dollars are necessary to improve student performance to adequate levels, but lawmakers, parents and the Michigan Department of Education owe it to students to examine how education dollars are spent, rather than simply throwing more money to areas that do not directly impact the classroom,” DeGrow said. “As our findings suggest, it could be that public schools generally fail to spend additional resources effectively.”

The only area that showed a statistically significant correlation between additional spending and student achievement was seventh-grade math, and the impact was small: a school would need to spend on average 10 percent more to improve the average state test score by just .0574 points.

“This study suggests that simply spending more of Michigan taxpayers’ dollars on the public school system alone is not enough to improve student achievement,” said Hoang.

Read the full study on “School Spending and Student Achievement in Michigan: What’s the Relationship?” at www.mackinac.org.

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Don’t forget to VOTE on road funding May 5


 

A special statewide election will be held on Tuesday, May 5, to decide whether to increase taxes for road maintenance and its outcome will affect every household in Michigan. Some school districts also have proposals on the ballot, but here in Cedar Springs and the surrounding area, we will only be voting on Proposal 1. The Post is rerunning an article we published recently by The Mackinac Center for Public Policy, which breaks down the proposal, and there is a link at the end for further information.

New study analyzes impact of Proposal 1 on taxpayers

The Mackinac Center for Public Policy published a new analysis of Proposal 1, which voters will be asked to approve or reject on May 5. The proposal increases taxes by $2 billion and aims to dedicate most of that revenue for future road construction and maintenance. In addition to reviewing the proposed constitutional and legislative changes, this new study estimates how Proposal 1 would impact the typical Michigan household.

James Hohman, author of the study and assistant director of fiscal policy at the Mackinac Center, used data from the U.S. Census Bureau, U.S. Department of Transportation and the U.S. Bureau of Labor Statistics to estimate that Proposal 1 would increase the tax burden of the typical Michigan household by about $500 in 2016.

“These estimates rely on assumptions about the average price of gasoline and other factors, but they’re about as close as one can get to figuring out about how much taxpayers would pay if voters approve of this plan to increase funding for roads,” Hohman said.

Proposal 1 would make four changes to the Michigan Constitution: increasing the allowable sales tax rate to 7 percent, exempting fuel purchases from sales and use taxes, prohibiting public universities from receiving revenue from the School Aid Fund and earmarking a portion of use tax revenue for the School Aid Fund.

These changes are “tie-barred” with eight legislative bills that will go into effect if voters approve of Proposal 1. These laws would hike the sales and use tax to 7 percent, create a new wholesale fuel tax of 41.7 cents per gallon and earmark this revenue for roads, increase the state’s earned income tax credit, boost spending on one public school program and create new rules pertaining to road construction projects for the Michigan Department of Transportation.

Regarding the proposed wholesale tax on fuel, it is likely that prices at the pump for gasoline consumers will be higher if Proposal 1 passes. Based on data from the U.S. Energy Information Administration, the average national gasoline price in 2015 will be $2.39. At this rate, consumers would pay about 10 cents more per gallon in taxes at the pump.

“The difference between the proposed gas tax and the current one depends a lot on the price of gasoline. But only when gasoline prices exceed $4.20 per gallon will consumers start to pay less at the pump under Proposal 1,” Hohman added.

The analysis found that the proposed new wholesale fuel tax will increase at a rate that will outpace inflation. The mechanics of the formula prescribed in the law to adjust the tax rate based on inflation ensures that the rate will grow faster than inflation.

“The way the fuel tax formula is designed, taxpayers can expect to see fuel taxation rates rise faster than inflation,” Hohman said.

Even though the earned income tax credit would be increased under Proposal 1 (from 6 percent of the federal EITC amount to 20 percent), low-income households in Michigan may not experience much of a tax benefit overall.

“The average EITC recipient’s tax burden will likely be reduced slightly if Proposal 1 passes, but there will be EITC recipients whose overall tax burden will still rise,” said Hohman.

The full study can be found online here: www.mackinac.org/21128

The Mackinac Center for Public Policy is a nonpartisan research and educational institute dedicated to improving the quality of life for all Michigan citizens by promoting sound solutions to state and local policy questions. The Mackinac Center assists policy makers, scholars, business people, the media and the public by providing objective analysis of Michigan issues.

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New study analyzes impact of Proposal 1 on taxpayers


 

The Mackinac Center for Public Policy published a new analysis of Proposal 1, which voters will be asked to approve or reject on May 5. The proposal increases taxes by $2 billion and aims to dedicate most of that revenue for future road construction and maintenance. In addition to reviewing the proposed constitutional and legislative changes, this new study estimates how Proposal 1 would impact the typical Michigan household.

James Hohman, author of the study and assistant director of fiscal policy at the Mackinac Center, used data from the U.S. Census Bureau, U.S. Department of Transportation and the U.S. Bureau of Labor Statistics to estimate that Proposal 1 would increase the tax burden of the typical Michigan household by about $500 in 2016.

“These estimates rely on assumptions about the average price of gasoline and other factors, but they’re about as close as one can get to figuring out about how much taxpayers would pay if voters approve of this plan to increase funding for roads,” Hohman said.

Proposal 1 would make four changes to the Michigan Constitution: increasing the allowable sales tax rate to 7 percent, exempting fuel purchases from sales and use taxes, prohibiting public universities from receiving revenue from the School Aid Fund and earmarking a portion of use tax revenue for the School Aid Fund.

These changes are “tie-barred” with eight legislative bills that will go into effect if voters approve of Proposal 1. These laws would hike the sales and use tax to 7 percent, create a new wholesale fuel tax of 41.7 cents per gallon and earmark this revenue for roads, increase the state’s earned income tax credit, boost spending on one public school program and create new rules pertaining to road construction projects for the Michigan Department of Transportation.

Regarding the proposed wholesale tax on fuel, it is likely that prices at the pump for gasoline consumers will be higher if Proposal 1 passes. Based on data from the U.S. Energy Information Administration, the average national gasoline price in 2015 will be $2.39. At this rate, consumers would pay about 10 cents more per gallon in taxes at the pump.

“The difference between the proposed gas tax and the current one depends a lot on the price of gasoline. But only when gasoline prices exceed $4.20 per gallon will consumers start to pay less at the pump under Proposal 1,” Hohman added.

The analysis found that the proposed new wholesale fuel tax will increase at a rate that will outpace inflation. The mechanics of the formula prescribed in the law to adjust the tax rate based on inflation ensures that the rate will grow faster than inflation.

“The way the fuel tax formula is designed, taxpayers can expect to see fuel taxation rates rise faster than inflation,” Hohman said.

Even though the earned income tax credit would be increased under Proposal 1 (from 6 percent of the federal EITC amount to 20 percent), low-income households in Michigan may not experience much of a tax benefit overall.

“The average EITC recipient’s tax burden will likely be reduced slightly if Proposal 1 passes, but there will be EITC recipients whose overall tax burden will still rise,” said Hohman.

The full study can be found online here: www.mackinac.org/21128

The Mackinac Center for Public Policy is a nonpartisan research and educational institute dedicated to improving the quality of life for all Michigan citizens by promoting sound solutions to state and local policy questions. The Mackinac Center assists policy makers, scholars, business people, the media and the public by providing objective analysis of Michigan issues.

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Mackinac Center gets FOIA charges reduced from$1,550 to $50


 

sw-riconcMichigan Liquor Control Commission waives fees for virtual copies

In celebration of Sunshine Week (March 15-21), the Mackinac Center for Public Policy announces its victory in persuading the Michigan Liquor Control Commission to release public information at a more reasonable cost. After being sued by the Mackinac Center Legal Foundation, the MLCC removed the charges for paper copies that do not exist.

On Nov. 7, 2014, Fiscal Policy Director Michael LaFaive requested data from the government agency in person while conducting research on “post and hold” rules for alcohol prices. Those rules allow wholesale distributors to collude and keep prices artificially high. Empirical research estimates consumers pay 6.4 percent to 30 percent more because of this practice.

An MLCC employee told LaFaive the data could be transferred to a flash drive on the spot. Not having a flash drive at the time, LaFaive offered to return in person with one to obtain the information. LaFaive agreed to submit an official Freedom of Information Act request.

On November 14, MLCC’s FOIA coordinator said a cost estimate and deposit was required for processing. The invoice estimated the cost of to be $50.22 for an hour and a half of labor ($33.48/hour) and $1,500 for copying 6,000 pages, at 25 cents a page.

On Jan. 22, 2015, the Mackinac Center Legal Foundation filed a lawsuit seeking relief from being charged for 6,000 virtual pages that did not exist on paper. Because of the lawsuit, the government agency withdrew its cost for digital files.

“Keeping government transparent and accountable to taxpayers is a primary concern for us,” said Mackinac Center Legal Foundation Senior Attorney Derk Wilcox. “Taxpayers have a right to this public information. They should not be charged exorbitant amounts of money for documents that are rightfully theirs, nor should they be charged for virtual copies of public documents. The MLCC tried to put a roadblock in the way of the public getting information. Our lawsuit changed its mind.”

In 2013, the foundation sued the city of Westland for charging an illegal gatekeeping fee and overcharging for labor and copying costs. As a result of the lawsuit, Westland changed its policies to comply with the law.

“The Mackinac Center uses FOIA to make sure government is serving the public, not the system,” said Executive Vice President Michael J. Reitz, who also serves as a board member of the Michigan Coalition for Open Government. “Government agencies should be willing to comply with the law rather than try to find ways to avoid it.”

“The MLCC FOIA coordinator said it was waiving fees for hypothetical copies ‘in the spirit of cooperation,’” said LaFaive. “We hope that cooperation continues when we request public documents in the future.”

 

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