How to Regulate Vacation Rentals in Michigan

And why property rights need to be secured

The Michigan Legislature is debating how to regulate vacation rental properties in the state. For as long as the “cottage up north” has existed, property owners have allowed others to rent their property and websites like Homeaway, VRBO and Airbnb have made this process easier than ever. But local governments in some Michigan communities are starting to overregulate and even ban short-term rentals like these.

From a free-market perspective, the government should not be preventing people from using their property as they see fit, as long as they aren’t violating the rights of others. Some local government officials and homeowners argue that renters are having loud parties, parking illegally or disrupting the neighborhood in other ways.

Two bills, House Bill 4503 and Senate Bill 329, try to tackle this problem. They prevent local governments from banning short-term rentals, but they explicitly allow them to regulate them in other ways. This is typically done by passing and enforcing ordinances related to noise, traffic, parking, advertising, litter, etc. This has led to opposition from local governments and others.

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An article from Holiday Vacation Rentals, a property management company in northern Michigan, written by Jeremy and Alan Hammond does a good job summarizing some of these issues. The post analyzes private property rights for homeowners and neighbors, the economic impact of vacation rentals and tourism and the impact the bills are likely to have.

In sum:

It is important to find solutions to address communities’ legitimate concerns about vacation rentals and other short-term rentals. However, solutions must be found that are equitable and don’t violate homeowners’ property rights. Municipal officials already have regulatory authority to address concerns arising from some guests’ behavior without resorting to zoning ordinances. Furthermore, restricting vacation rentals is harmful to the economy at both the local and state level. Professional vacation rental management companies are an important part of the solution as they use and can enforce contractual rental agreements that help ensure rental guests remain good neighbors who are respectful toward others within our communities.

One of the most important individual rights is the ability to have ownership and control of your private property. The right to use your property as you see fit can be bothersome to others and governments can create regulations to help manage these issues. But those regulations should be fair and limited. The bills under consideration in the Michigan Legislature successfully navigate these issues and protect property owners’ rights while maintaining local governments’ ability to regulate when necessary.


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How Right-to-Work and the End of the 'Dues Skim' Killed the SEIU in Michigan

Membership, revenue and political spending plummet

In 2012, the Michigan branch of the Service Employees International Union representing home health care workers was riding high. It had 55,000 members, brought in $22 million annually and was able to spend nearly $3.5 million on politics.

Then it all came crashing down. Five years later, the union is a shell of its former self. Membership plunged to under 10,000. Revenue is less than one-third what it was at its peak. Political spending bottomed out at less than 5 percent of what it once was. And the union is in an emergency trusteeship to investigate potential financial malpractice.

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What led to such a swift downfall? Well, when health care workers were provided a choice about supporting the SEIU, they responded by opting out of the union in spades. The Michigan Legislature empowered this choice by ending the “dues skim” and then passing right-to-work.

Dues Skim

In 2005, former Michigan Gov. Jennifer Granholm worked with the SEIU to “organize” home caregivers. This skyrocketed the union’s membership, allowing them to skim “dues” money directly from the Medicaid checks paid out to disabled residents. The vast majority of the people forcefully unionized were friends or relatives of these Medicaid recipients, but were improperly classified as “government employees” so that the SEIU could claim to be representing them and collect dues from them.

In 2012, the Legislature and Gov. Snyder passed a law ending the scheme, which was taking $6 million annually from Medicaid recipients. SEIU Healthcare-Michigan then tried to pass a ballot proposal, which would have enshrined this scheme in the Michigan Constitution. But Proposal 4 of 2012 went down overwhelmingly and the “dues skim” ended officially in 2013.

Right-to-Work

In the meantime, state legislators passed a right-to-work bill in 2012 which went into effect in 2013. A U.S. Supreme Court decision ultimately overruled similar “dues skim” agreements around the nation, but right-to-work gave these workers the ability to opt out of having to financially support the union if they didn’t want to.

These two bills gave home caregivers a choice. If they believed the SEIU was doing a good job “representing” them, they could freely write them a check. If they did not, they could withhold funding. The results are in:

The union saw a decline in membership of 83 percent from its peak.

This has led to revenue declining by 69 percent from its peak.

Which ultimately means less money for the union to spend on politics. Political spending bottomed out at less than 5 percent of what was spent during the high-water 2012 election and ballot proposal year.

All of this goes to show that this SEIU union existed almost entirely based on its ability to coerce people to financially support it. Once Michigan workers were given the freedom to choose, the union collapsed, suggesting that it never was providing much, if any, benefit for these workers in the first place.


Related Articles:

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Unconstitutional? Not If These Resolutions Pass

November 17, 2017 MichiganVotes weekly roll call report

The Legislature is on Thanksgiving break with no sessions scheduled until Nov. 28. Since there were no votes this week, this and next week’s report describe some of the 39 amendments to the state constitution that lawmakers have formally proposed this year. To become law these require a two-thirds vote in the House and Senate and approval by voters.


Senate Joint Resolution K: Lower minimum age for governor

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Introduced by Sen. Ian Conyers (D), to place before voters in the next general election a constitutional amendment to eliminate the current minimum age requirement for governor and lieutenant governor, which is age 30. The bill would leave in place a requirement that a candidate have been a registered voter in the state for at least four years, which implies a minimum age of 22 to be governor. Conyers was age 28 when elected in Nov. 2016. Referred to committee, no further action at this time.


House Joint Resolution Q: Propose a part time legislature:

Introduced by Rep. Tom Barrett (R), to place before voters in the next general election a constitutional amendment that would limit annual legislative sessions to 90 days. Since 2001 more than 20 part time legislature proposals have been introduced. This one would establish weekend sessions once a month plus two-week legislative sessions twice a year. Referred to committee, no further action at this time.


House Joint Resolution R: Replace House and Senate with unicameral legislature

Introduced by Rep. Jeff Yaroch (R), to place before voters in the next general election a Constitutional amendment to establish a nonpartisan unicameral legislature (instead of a separate House and Senate) with 110 districts apportioned on the basis of formulas specified in the resolution. Legislators would have four year terms and term limits would be repealed. Voters would no longer see a party designation after legislative candidates’ names on ballot. Referred to committee, no further action at this time.


House Joint Resolution S: Prevent making controversial bills “referendum-proof”

Introduced by Rep. Robert Wittenberg (D), to place before voters in the next general election a constitutional amendment to revise the current prohibition on citizen referendums challenging bills that contain an appropriation. The measure would establish that the ban only applies to bills that substantially fund one or more state departments, or which are needed to close current state budget shortfalls.

A 2001 Supreme Court ruling interpreted the provision to prohibit referendums on any bill containing an appropriation. In several instances since then, the legislature has deliberately added modest appropriations to controversial bills which, without the appropriation, would likely have been challenged by a referendum. Referred to committee, no further action at this time.


SOURCE: MichiganVotes.org, a free, non-partisan website created by the Mackinac Center for Public Policy, providing concise, non-partisan, plain-English descriptions of every bill and vote in the Michigan House and Senate. Please visit www.MichiganVotes.org.


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MEA Attack on Online Charters Misses Mark

Policy based on bad data, double standards would hurt families

Aley Minton and her sons, Ty and Wyatt.

One way to attack an education option that works for families is to be selective about data and your own standards.

In her Labor Voices column in The Detroit News, Paula Herbart, the new Michigan Education Association president, labels the state’s online charter schools a “spectacular failure” and calls for lawmakers to “end the experiment.”

The union leader’s prescription to shut down all cyberschools would hurt real families. A cyberschool proved to be a lifesaver for the Smith family in DeWitt, providing them needed stability and flexibility to overcome a significant tragedy and ongoing medical challenges.

Aley Minton used to be a skeptic of educational choice, until dire circumstances drove her to enroll her two sons in a cyberschool. The St. Clair County family’s old brick-and-mortar school left them in a difficult place by not adapting to their children’s individual learning and physical needs. “Our family chose to utilize school choice because our youngest son is epileptic and our oldest son is dyslexic,” Minton said, noting how one son was struggling academically while the timing and intensity of the other’s seizures could make it difficult for him to function during regular school hours.

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In their sixth year at Michigan Connections Academy, the Minton boys are making great strides with the freedom and support they have found. “When we first started (virtual learning) our oldest son was on a second-grade level in the fifth grade,” their mom added. “He is now on grade level, being successful and both of their needs are being met.”

Real-life success stories provide only part of the picture. The MEA president’s strident case simply isn’t supported by the data. While there’s been little quality research on how well students learn in cyberschools, she failed to mention the most applicable finding.

First, Herbart cited a Rand Corporation study of Ohio, which found that lowest-achieving students tend to struggle even more when they transfer to a program, operated by a charter school, that primarily takes place over the internet. Second, she highlighted a criticism from a 2015 Online Charter School Study by CREDO, a research institute based at Stanford University.

Yet Herbart neglected to mention that our state’s results bucked the trend. CREDO said Michigan cyberschool students showed small gains, though the findings were not statistically significant. In other words, Michigan cyberschools probably perform just as well as other types of schools, if not slightly better.

Herbart argues against letting any charters, including cyberschools, get a little bit more of the funding available to other schools because “there is no guarantee that this funding would ever be used to help student achievement.” Yet there is no guarantee that more funding would boost achievement in the unionized conventional school districts she supports, either.

“More funding for me but not for thee” is not her only double standard. To bolster her case to shut down cyberschools, the MEA president singles out Michigan Virtual Academy for finishing below 97 percent of all public schools on the state’s Top-to-Bottom rankings. But these rankings say more about a school’s demographics than its performance. On the Mackinac Center’s recent High School Context and Performance Report Card, the academy achieved about as well as expected given its rate of student poverty.

And when it comes to shutting down conventional schools that perform badly on the state rankings, the MEA has had a different message. It has opposed efforts to close persistently underperforming public schools, saying they can’t be blamed for poor performance because their students are poor.

Should schools be judged by their performance, after taking the rate of student poverty into account? That’s the question facing the state’s largest teachers union. It should opt for consistency and abandon its unfounded attack on alternative education models.


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Update: D.C.’s Tax Reform Sausage Making May Still Work Out

Tax Foundation Calculates $2,500 gain per Michigan family

In a previous blog post I reported details of the GOP federal tax reform plan — with some commentary — a few hours after Capitol Hill leaders announced the details. Much has happened since then, including a new analysis by the Washington, D.C.-based Tax Foundation. In addition, the big news from yesterday is that the Senate announced it would include a repeal of the Accordable Care Act (Obamacare) individual mandate in its version of the plan.

The Tax Foundation on Monday released its analysis of the Senate version of the Tax Cuts and Jobs Act. It concluded that the Senate’s version of reform would lead to 925,000 new jobs and would result in a 4.4 percent increase in net income through 2020. Specifically, it estimates that Michigan would see more than 27,000 new jobs in the state and an after-tax income gain of $2,512 per family with a middle income.

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A graphic posted on the Tax Foundation’s website breaks the tax reform down to several different scenarios. These include the single person with a low income and the married couple with a high income, and in each case, the graphic explains how the tax burdens play out under scenarios involving the standard deduction. The Foundation reports that a single tax filer making $30,000 and taking the standard deduction would see a drop in tax liability of 9 percent and enjoy a 1.3 percent increase in after-tax income. On the other end of the economic scale, a married couple with a $2 million income and an itemized return would see their tax bill increase by 1 percent and their tax liability drop by 0.3 percent.

One move with unpredictable results came yesterday when senators announced they would address health care reform in the tax plan. The Senate version of tax reform will include a repeal of the controversial individual mandate that is part of the Affordable Care Act. It is estimated this change will lead to a decrease in Medicaid costs and Obamacare subsidies paid out for insurance and thus, a decrease in the federal deficit of $338 billion over 10 years.

This late move has baffled tax policy analysts and others. An Obamacare mandate repeal had not been part of previous tax plan discussions. And for good reason. It muddies up the overall debate, draws attention to what might happen to uninsured Americans in the future, and it may weaken the prospects for a more sweeping and positive national health care reform down the road. Perhaps worse, this questionable move may pave the way for more, worse amendments.

Sen. Rand Paul, a Republican from Kentucky, for instance, has suggested using savings from eliminating the mandate to allow some deductions for state and local taxes. This tax deduction should be repealed. Almost one-third of its benefits accrue to income earners in just two states, New York and California, according to the Tax Foundation. At the individual level, most benefits accrue to high-income earners. Repealing SALT completely is the ideal change, though Sen. Paul and others appear set on keeping it to some degree.

Another component of the current tax law that appears set to survive, but should not, is the estate tax. The Senate plan keeps the estate tax but doubles the size of the exemption.

The federal tax plan is moving forward and key, vital provisions — such as rate changes to personal and corporate income taxes — remain intact. Will repealing the Obamacare mandate improve its chances? I don’t know, but I remain optimistic, if also ever vigilant over politicians’ ability to snatch defeat from the jaws of victory.


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Michigan Was Right to End Film Incentives

New report backs up legislators

In 2015, Michigan legislators voted to wrap up the state’s film subsidy program – with the last dollar being paid out recently. This was nearly a decade after the program started and ultimately became the most generous in the nation, spending nearly half a billion dollars over time.

More than 40 states have film incentive programs, but a review of the evidence finds none of them return money to state treasuries. A few have joined Michigan in cutting back their programs, with Virginia the latest to reconsider the value of giving tax dollars for film production. A state report from Virginia auditors finds the incentives are a net loss for taxpayers and generate few economic benefits.

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Proponents say subsidies for filmmaking are good for the economy, but enticing filmmakers to come to state comes at a substantial cost. The transfers move production from one state to another and set off a race to the bottom to see which state can be the most profligate. That’s what happened in Michigan: Film production picked up when the program was uncapped. But even with tens of millions of dollars spent in the final year of the program, Michigan had fewer film jobs than before the subsidies began.

A new study by Charles Swenson of the University of Southern California looks at the experience of many states.

This study finds that while movie production incentives were effective in increasing the number of film production employment and establishments for a few states such as New York and California from 1998 to 2011, there was no discernable increase across all states. Much of this noneffect appears because of a “crowding out” effect due to the sheer number of states with incentives.

In other words, jobs may increase in the short-term, but it’s tough to build an industry.

USA Today has developed a database of more than 5,000 projects that get incentives from states. Corporations behind virtually every major television show and movie try to get special benefits from taxpayers.

These projects are a drain on state budgets and do not justify their costs. It’s good that Michigan ended its program. Other states should follow.


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Corporate handouts remain unfair and ineffective

Gov. Snyder’s support of legislation this year to provide taxpayer subsidies to a billionaire real estate developer (and others) and to large corporations has compelled me to ask “Why?” in a very public way.

Why the changed position? Why was buying ‘businesses into the state’ — as the governor mentioned in a 2013 speech (below) — not good early in his administration, but perfectly OK and even encouraged by him later? The scholarly evidence on state and local economic development programs hasn’t changed since then — such programs still appear largely ineffective — so what happened?

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Some background is in order. As a gubernatorial candidate, Rick Snyder’s campaign material was encouraging. While it didn’t eschew incentives completely, it did state, “The use of incentives must decrease as Michigan improves its overall business climate.” It also said, “[R]ather than spending more on incentives, credits and deductions that benefit certain industries, Lansing should lower the tax burden on all industries.”

He initially followed through as governor, killing the multibillion dollar Michigan Economic Growth Authority business subsidy program and lowering corporate taxes. These initial strokes were so bold I thought he deserved a “Profile in Courage”-type award. Justifiably, Gov. Snyder bragged about these accomplishments during a speech at the American Enterprise Institute in 2013. (Watch the one-minute video clip, below.)

In the video above the governor lamented that the previous administration was:

… trying to buy businesses into our state by giving out these big tax credit programs to get people to come to Michigan. I don’t think that’s right because I think that’s not fair. You’re not creating a level playing field — a fair, competitive playing field — and in fact, you’re disadvantaging people that have been in your state doing business for how many years.

The tax credits you referred to in the AEI video as the “heroin drip of government” were actually refundable ones, making MEGA an outright cash subsidy program.

Since these early reforms, however, the governor appears to have capitulated on handing out larger incentives. Indeed, he lobbied for and signed into law two new subsidy programs in 2017. A Crain’s Detroit headline from last December read “Snyder: I’m warming up to business incentives.”

Why is the governor now happy to “buy businesses into the state” and related jobs through handouts when he considered this unfair a few years ago? Subsidies to purchase businesses and related jobs come at the expense of small businesses and Michigan workers, now apparently forgotten, who pay the bills of government.

The “Good Jobs for Michigan” legislation was passed this year, in part, with the hope of securing a plant for the multinational, Taiwan-based corporate titan Foxconn. An Oct. 19 Detroit News article reports that the total value of incentives the state dangled in front of Foxconn exceeded $7 billion. How is that not “buying” jobs? In addition, these are not even the first new subsidy programs he has championed, just the most recent.

Even when subsidy recipients are homegrown, such handouts are still unfair. One of the most recent programs signed into law was basically initiated for the benefit of Michigan’s wealthiest citizen and a handful of other big developers. This subsidy program for developers would actually let a lucky few keep a percentage of the personal income tax of their workers. The symbolism is remarkable: The state allows very wealthy developers to take money from workers of modest or even humble means and retain it for itself.

What is all the more galling about the passage of this legislation is that during the same year, Gov. Snyder and other Republicans also opposed an across-the-board personal income tax cut for the rest of us. Eleven of 12 Republicans that voted against one small tax cut proposal voted for developer subsidies. The message, it seems, is that: All Michigan citizens are equal, but some are more equal than others in the eyes of some Lansing politicians. The politically favored rich still get to play by different rules than everyone else.

If you’re a billionaire developer with access to Lansing’s power corridors, you get to keep someone else’s income taxes. But if you’re just another worker, you can’t keep even a little more of your own. There is a lot that is grievously wrong this picture. Since Gov. Snyder is currently the chief painter, I can’t help but circle back to my original question: Why the about-face change in positions?

Many would like to know the rationale for the governor’s capitulation on corporate welfare. Why have Lansing politicians betrayed their ideals? Has the evidence presented by the Mackinac Center or other scholars suddenly changed? By all means, if it has, would someone in Lansing please share it?

I want to offer the governor a presumption of goodwill. There must be a sound reason for his change. Could someone please provide it?


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November 10, 2017 MichiganVotes weekly roll call report

Senate Bill 584, Expand concealed pistol “no-carry zone” exemptions: Passed 25 to 12 in the Senate

To authorize an exemption from the “no-carry zone” restrictions in the law authorizing shall-issue concealed pistol licenses, if a licensee gets extra training. No-carry zones include schools, day care facilities, sports stadiums or arenas, bars, bar/restaurants, places of worship, college and university dorms and classrooms, hospitals, casinos, large entertainment facilities and courts. Under the bill private property owners, colleges and universities could still ban guns, schools could prohibit teachers and staff from carrying guns, and licensees could not openly carry a gun in a no-carry zone.

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Who Voted "Yes" and Who Voted "No"


House Bill 5095, Adopt Coast Guard ballast water discharge permit standards: Passed 25 to 11 in the Senate

To adopt the U.S. Coast Guard standards for ballast water discharges from oceangoing vessels. Michigan adopted its own standards in 2006, which was before the Coast Guard finalized theirs in 2012. The standards are intended to combat the threat of invasive species.

Who Voted "Yes" and Who Voted "No"


House Bill 4787, Require personal data details on ice shanties: Passed 96 to 11 in the House

To revise the requirement that ice fishing shanties must have the owner’s drivers name and address affixed to each side, by allowing either the owner's drivers license number or fishing license number instead. Also, to allow the Department of Natural Resources to determine the date each year when shanties must be removed from the ice based on actual weather and ice conditions. Current law sets fixed removal dates.

Who Voted "Yes" and Who Voted "No"


House Bill 5165, Revise unemployment insurance rules to avoid impostors and fraud: Passed 107 to 0 in the House

To revise rules and procedures used by the state’s unemployment insurance program to address the problem of impostors claiming and getting unemployment benefits. The bill would create a process for employers and individuals to file an affidavit that a particular claim is fraudulent, and prescribe actions and timetables state officials must take. It is part of a legislative package comprised of House Bills 5165 to 5172.

Who Voted "Yes" and Who Voted "No"


House Bill 4500, Define fetus as “person” in criminal sentencing: Passed 63 to 44 in the House

To revise a provision of the state’s criminal sentencing guidelines that includes the number of actual or potential victims among the factors on which sentences for violent crimes are assessed. The bill would define an embryo or fetus as a "person" and a victim for purposes of this provision.

Who Voted "Yes" and Who Voted "No"


SOURCE: MichiganVotes.org, a free, non-partisan website created by the Mackinac Center for Public Policy, providing concise, non-partisan, plain-English descriptions of every bill and vote in the Michigan House and Senate. Please visit www.MichiganVotes.org.


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The Business Climate Matters More Than Amazon

Number of jobs created apart from Amazon dwarfs that offered by retailer’s new project

At 50,000 jobs, the Amazon second headquarters project is the largest proposed expansion I’ve ever seen. Whether it will deliver on its promises is an open question. But even this large project pales in comparison to the number of jobs the economy creates and loses on a regular basis, and this turnover happens without fanfare.

According to the Bureau of Labor Statistics, Michigan lost 184,414 jobs in the first three months of 2017. The state also added 211,095 jobs over the period. Job loss was down and job creation was up from the previous quarter.

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In other words, even if the Amazon HQ2 project fulfills its expectations, it would not replace a single month’s worth of job losses in Michigan. Yet without press releases, hype videos or haranguing, the private sector is able to more than replace the jobs lost.

Instead of trying to land a big project, policymakers should look at the basics of their business climate. The basics matter more.


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Let Them Fill Growlers

Mackinac Center testimony on beer freedom

The Michigan Legislature is considering House Bill 5175 which would “expand the types of liquor license holders allowed to refill clearly labeled ‘growlers' (sealable containers of up to one gallon) with beer for consumption off-premises.” Policy Analyst Jarrett Skorup testified on the bill before the House Regulatory Reform Committee on Nov. 1, 2017. His testimony is reprinted below.

This bill is a simple one — it lowers the threshold by one major step to make it easier for people to buy and sell beer. At the end of the day, this bill expands the ability for people to freely buy a legal product with no cost to the state or other residents. The Mackinac Center is happy to support it.

As former Liquor Control Commission Jim Storey has noted, when Gov. Snyder came to office, he started out with an ambitious and overdue effort to remove zealous trade barriers and overreaching alcohol regulations. Many of these have been changed, but Michigan is still one of the most highly regulated states.

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More than most other states and far more than those we border, Michigan regulates how alcohol can be produced, transported, advertised and sold. And there is simply no evidence that this protects citizens or consumers — the alcohol “control states” are no safer than those with the least regulations.

Current rules simply cause higher prices and drive more business underground. The current rules regarding who can sell growlers are overly confusing and have caused people to get into trouble needlessly. We’re happy to see legislators consider chopping back one more regulation and we encourage you to look at the system from top-to-bottom as a whole.


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