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Michigan Governor Reinvents Laws Of Economics

by Mike Godfrey,, New York

18 December 2001

Undeterred by the ignominious failure of his plan to force Michigan citizens to pay use taxes on their Internet purchases by the use of moral suasion, Governor John Engler now plans to wire Michigan for "broadband" high-speed internet access as a way of encouraging more companies to invest in the state. That may be a sensible goal, but John 'Colbert' Engler has one more time reached for the taxman in order to implement his plan.

On planet Engler, says the Wall Street Journal, higher taxes and more regulation may lead to more investment, but here on earth, the opposite is true.

Engler and fellow traveller Governor Mike Leavitt of Utah led the efforts to persuade Congress to impose a tax on the Internet that was again defeated recently when the moratorium on Internet taxation was extended for a further two years.

Mr. Engler now proposes that Michigan's telecommunications network be turned into a de facto regulated utility, with $100 million in additional taxes on phone and cable lines and a new state bureaucracy with unprecedented powers to implement a swarm of new regulations.

The Detroit News estimates that, should the Governor's plan win approval, "Michigan would rank among the costliest states for Internet services" and "consumers would pay heavily in both higher prices and fewer online choices."

But as the Wall Street Journal says, market forces are providing for high-speed Internet access where a demand exists, whether in Michigan or elsewhere. In a speech in October, Federal Communications Commission Chairman Michael Powell said, "73% of households have cable modem service available, and 45% of households have access to DSL. Combined, broadband availability is estimated to be this year almost 85%."

Michigan ranks 11th among the states in terms of the number of companies offering broadband, and 10th in the number of available high-speed lines, although only 37th in terms of the proportion of households subscribing to broadband service. So Mr Engler's solution is to persuade more people to subscribe by making it more expensive?

Sorry, can you please run that past me again?

Nonetheless, there is a chance that the madcap plan will succeed. "It's hard to bet against him." says State Representative Leon Drolet, a Republican who opposes Mr. Engler. "On the other hand, Engler suffered a lot of bruises on the Internet sales tax issue, where a lot of Republicans opposed him, and he's had to rely on Democrats to get some things passed. So he can be vulnerable."

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