Friday, October 3, 2008

State Senate approves Michigan business tax cut

On the heels of the McCain announcement to pull his campaign out of Michigan, some good news for Michigan

by David Eggert Associated Press
Thursday October 02, 2008, 6:43 PM

LANSING -- As promised, Senate Republicans on Thursday voted to more quickly phase out a 22 percent surcharge that was added to Michigan's business tax to help resolve last year's budget crisis.

The move delighted the business community and garnered some Democratic votes, too. The unresolved question: How to offset the loss of hundreds of millions of dollars in tax revenue for state government?

The legislation passed 26-12 and was sent across the Capitol to the Democratic-led House. A spokeswoman for Democratic Gov. Jennifer Granholm said she would be open to Michigan Business Tax adjustments if they were "pared with reforms that can save the state money."

Republicans did not list specific spending cuts. The vote appeared to be an attempt to start talks that may not get serious until 2009, after the November election and short lame-duck legislative session.

"It's our obligation to try to help out our Michigan business owners," said GOP Sen. Mark Jansen of Kent County's Gaines Township.

Senate Democrats accused the Republican majority of "shooting from the hip" without addressing potential budget implications or examining Michigan's overall tax policy.

Jansen, who led a subcommittee exploring the MBT that took effect at the start of this year, said the surcharge drew the most complaints from businesses. Under the bill, the 21.99 percent surcharge would drop to 14.66 percent in the 2009 tax year, to 7.33 percent in 2010 and be eliminated in 2011. It likely will go away in a decade under current law.
After passing and then quickly abandoning a tax on services last year, Granholm and the Legislature approved the surcharge to help balance a $1.8 billion budget deficit.
Businesses have vowed to repeal it ever since.

"Now more than ever Michigan needs to encourage businesses to invest and grow jobs here, not chase them away," said Richard Blouse Jr., president and CEO of the Detroit Regional Chamber.

The MBT was a revenue-neutral replacement of the Single Business Tax.

The state Department of Treasury said that even with the surcharge generating more than $700 million a year for state government, nearly 98,600 businesses will owe less in taxes this year than in 2007. Nearly 45,600 will pay more. About 13,900 will see no change in their tax liability.

Also Thursday, the Senate voted 27-11 for a bill that would remove sales taxes from the calculation of gross receipts. MBT liability in part is based on gross receipts, and critics say including sales taxes was unintentional.

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