Finance

Revenue Retiree: A Michigan Tax Faces the Ax

It sounds like a drama-series finale where the scriptwriters can't agree: Michigan's unusual Single Business Tax is going to die, but how remains a matter of debate.
by | July 2007

It sounds like a drama-series finale where the scriptwriters can't agree: Michigan's unusual Single Business Tax is going to die, but how remains a matter of debate.

The scriptwriters in question are Democratic Governor Jennifer Granholm and Republican legislative leaders. They concur that the tax- -born in the 1970s and designed to simplify life by folding all business levies into one--deserves to be ditched.

The complaints against the tax are that over time it has become confusing and complicated and that, in a job-starved state, it singles out companies that hire additional workers. However, perhaps the biggest strike against the levy has been its bad reputation, which critics say discourages companies from locating in the state. "Part of the problem with having a unique tax is the perception it provides to businesses," says Ari Adler, a spokesman for Senate Majority Leader Ken Sikkema. "It's not a good tax, but the image is three times worse than the reality."

The thorny question of what will replace the tax remains unanswered, however. Both the governor and legislators agree that a new levy or levies should also be on businesses and not individuals, but that's where the consensus ends. Granholm wants a replacement to provide the nearly $2 billion a year that the Single Business Tax brings in, but Republican legislators are willing to consider a net tax cut.

They also have clashed over process, with GOP legislators trying to push up the tax's death from 2009 to 2007 without something new already in place, and Granholm objecting that a replacement should be included in any bill. A joint House-Senate legislative committee is expected to generate alternatives by early December.

Josh Goodman
Josh Goodman  |  Former Staff Writer
mailbox@governing.com

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