Wednesday, April 16, 2008

The New Michigan Business Tax...there goes the family business

Under the new Michigan Business Tax, you have to pay a 22% surcharge unless you are below a certain threshold in total revenue, total net income and total "personal income". That third number is $180,000. So, if your small business pays you a salary of $180,000 or more, you pay the surcharge.

I talked to a small business owner the other day. He has 5 employees. Unfortunately for him, two of his employees are his married daughters. They are part of the family business. The MBT includes a clause for what is called "attribution". Anyone who works for the business who is part of the family is attributed as the same person for total personal income purposes.

So, this poor guy, who paid $10,000 in Single Tax liability last year, has to pay $55,000 this year. Why? Because his personal income from the business, combined with his daughters' personal incomes, amounts to more than $180,000!

Like I said, there goes the family business.

1 comment:

theritzman said...


By now you know that small business in Michigan is being hammered by the new MBT. Averages appear to be 3-5 times last year's MBT.

Repeal the jobs killing tax now! Cut government jobs like businesses has been cutting in Michigan!

Otherwise the billboards will ring true:

There are billboards along the Indiana/Michigan border. They say "Come on Indiana for lower taxes, business and housing costs."

Mike Ritsema