Wednesday, November 28, 2007

The Lansing Report for November 28, 2007

This is a crucial week for the state of Michigan. We are only three days from implementation of what is certainly the most damaging tax on business in the state's history.  Read on to find out how we got here and what is being done (or not done) to resolve the problem.

First, a Little History

Early on the morning of October 1st, after the state had officially shut down, the Legislature increased the income tax from 3.9% to 4.35% and implemented a new tax of 6% on certain services. This second tax, which is purported to bring in $650 million in new revenue, is a heavy burden on the business community.  Most of the tax will be collected on business-to-business transactions.  It did not take long for the business community to spring into action. They recently launched a petition drive called "Ax the Tax."
This onerous tax is scheduled to go into effect on December 1st.

Michigan on the Brink

With the December 1st date looming, the legislature has been slowly and somewhat deliberately working on a "fix". The House acted to repeal the services tax and immediately replace it with a surcharge on the Michigan Business Tax.  The new MBT, enacted early this year, replaces the Single Business Tax (SBT).  It affects over 60,000 businesses in the state. The surcharge would be an amount equal to 33% of the current liability owed by each business. So, what the House did was ask virtually every business in the state to pay an extra 33% on their tax bill. (Companies with less than $350,000 in business activity do not pay MBT.) The House did essentially exempt the largest corporations in the state, however.  They put a cap on the surcharge of $2 million.  There are perhaps 25 or 30 companies that would pay much more than $2 million otherwise.
Meanwhile, the Senate repealed the services tax as well. They replaced it with a surcharge of "only" 14% and a cap on large businesses of $7.5 million.
Today in the House, we are waiting to see if we will act on the Senate version or pass a modified version that is somewhere between the original House version and the Senate version.  Regardless, we will be putting a heavy burden on 60,000 businesses in this state. Many of those businesses are on the brink of extinction.  With all the other pressures they are facing, this could be the last straw.
Today is Wednesday. We have the rest of today, tomorrow and Friday to address this issue. It looks as if we may be in the eleventh hour before we act.


Since this crisis began on October 1st, the House has been holding hearings and voting on various bills and resolutions such as:

  • HR233 commemorating the 50th anniversary of the Detroit Lions National Championship.

  • SB593 licensing and regulating tattoo parlors.

  • HB4730 mandating hard-wired carbon monoxide detectors in ALL hotel rooms. (Current death toll from carbon monoxide inhalation in hotel rooms in Michigan: zero.)

  • HB5341 mandating hard-wired carbon monoxide detectors in ALL new residential structures.

  • HB5375 creating Promise zones for the poor, to give free college education to any child (rich or poor) if she lives in a poverty stricken district. (Oh, and it only applies to regular public schools, not charters, privates or home schools.)

  • HB4163 prohibiting smoking on private property (bars and restaurants).

We were in recess from November 9th through November 25th. (Traditional hunting/Thanksgiving break.)

No comments: