Saturday, June 30, 2007

Business Tax (increase) replacement passed legislature

First off, this is completely seperate from Granholm's push for higher general taxes, including state sales and income taxes. This is just the replacement for the Small Business Tax. However, technically, this is also a tax increase, as the old SBT was being phased out anyway. This is a bad bill, and should have been defeated.

The bill was SB94. There was several substitutes within the bill, so it's tough finding the details to it. The conference report was the final version. It can be found here about one third through the page It is EXTREMELY long and complicated.
What affects us the most is that insurance premiums are taxed 1.25%. We can expect to pay more on our already ridiculously high auto insurance premiums. Thanks government. That's just what I needed. Jerks.

The only three no votes in the senate on this bill were Michelle McManus, Bruce Patterson, and Alan Sanborn. John Pappageorge and Alan Cropsey were excused from voting. Jim Barcia did not vote. The rest of the senators voted for this, including Valde Garcia. If you do not see your senator's name here, he or she supported this tax.

On the house side, there were 75 yes votes, and 34 no votes. The 34 votes were all Republican.

Voting NO:
Dan Acciavatti
Dave Hildenbrand
Arlen Meekhof
Dave Robertson
Dave Agema
Jack Hoogendyk
Kim Meltzer
Tonya Schuitmaker
Darwin Booher
Ken Horn
Chuck Moss
Fulton Sheen
Jack Brandenburg
Joe Hune
Neal Nitz
John Stahl
Tom Casperson
Rick Jones
Brian Palmer
John Stakoe
Craig DeRoche
Marty Knollenberg
John Pastor
Glenn Steil
Kevin Elsenheimer
Phil LaJoy
Phil Pavlov
Howard Walker
Judy Emmons
David Law
Tom Pearce
Chris Ward
John Garfield
Jim Marleau

The statements against this tax proposal:

Rep. Meekhof, having reserved the right to explain his nay vote, made the following statement:

"Mr. Speaker and members of the House:

Michigan needs an aggressive plan to attract jobs. As a replacement for the job-killing SBT, the proposed Michigan Business Tax doesn't do enough to turn our economy around. We need real reform that will promote economic growth and bring back jobs.

The MBT is flawed in several ways. It fails to provide the overall tax relief businesses need to bring back jobs. Because the plan is structured around gross receipts, companies that do not make a profit could still end up having to pay taxes. The cap on revenues is not permanent; it only lasts for three years meaning the government could end up collecting far more than originally intended and will have a blank check to spend more taxpayer money.

Workers and business owners in our community deserve better. I will continue to fight for a plan that is beneficial to everybody. We need a plan to attract jobs and I'm committed to making sure we have it."


Rep. Meltzer, having reserved the right to explain her nay vote, made the following statement:

"Mr. Speaker and members of the House:

After carefully considering my vote on SB 94, I have decided that I simply cannot endorse the bill as presented. While I recognize there has been a lot of work effort put into this budget plan from both sides, I have significant concerns.

Of great concern is the uncertainty of how much revenue the plan is projected to generate. A 'trigger' set at 5% over the FY 08 base will be set. From that 5% point the government will keep half of the remaining overage while refunding the other half to the taxpayer. This could potentially be a huge windfall for government and an overall tax increase.

This revenue brought in by the trigger is said to be mainly paid by other states, however the constitutionality of that proposal is a concern as Ohio is now involved in litigation for its similar tax construction which taxes businesses from outside states differently than in state.

SB 94 also fails in the following objectives: broad based, simplification, tax equity, create a system which is easy to adhere to, and make it inviting and competitive to attract new businesses to Michigan. These were the goals both parties and the governor agreed should be part of the replacement plan.

Broad based means the plan should be similar to other states. The similarities fail to exist not in the type of taxes, but that no other state requires all of these taxes. SB 94 is not simplified. In fact the proposed plan provides a third tax where the SBT had two. Different tax requirements between in state v. out state means the taxes are not equal. Because of all the carve outs and exceptions SB 94 is extremely complicated. And finally, although the personal property tax exemption is substantial in comparison to our existing code, in comparison to other states where they have no personal property tax liability, SB 94 may fail to attract new business.

The simple fact is that Michigan needs to enact a dramatic reform to its' business tax structure in order to stay competitive in the global marketplace of the 21st century. Unfortunately, I remain unconvinced that SB 94 accomplishes this goal."


Rep. Sheen, having reserved the right to explain his nay vote, made the following statement:

"Mr. Speaker and members of the House:

I cannot vote for Sb 94, because it will not help the state of Michigan. The creation of separate taxation systems runs rough shot against the supposed goals of simplification and equity in taxation of all businesses in Michigan. Establishing a base gross receipts tax rate and giving credits to in-state, but not out state businesses, so as to export a greater tax liability to out-state business is great idea, but it will be challenged as an abridgement of the Commerce Clause, because we are taxing out-state business differently than in- state. Ohio did many of the things Michigan is considering and has been challenged in court and it looks as if they will have to redo their plan. Trying to put the Senate and House plans together, which are comprised of four different taxes, with only one overlapping business income tax, is not good tax policy; it is politics at its worst.

It remains to be seen, who will be better off with the new taxation system. No matter how they duct tape the House and Senate plans together or how many additional carve outs and exceptions they create to make it work and to cut a deal, Michigan's Business Tax Structure will be a mess and even more complicated than it was before. We will still have a Gross Receipts Tax of .75% or more (which the people rejected when they over-rode the Governor's veto of the SBT), a Personal Property Tax (which every state around us has gotten rid of), with 'potential' credits for some businesses that range between 24% - 46%, if you can qualify; and we will now add a third business tax, a Business Income Tax, which ranges from 1.85% for companies generating receipts under 20 million and 5% for those above 20 million.

The goals which were set three years ago were: broaden the base, simplification, tax equity, create a system which is easy to adhere to, and make it inviting and competitive to attract new businesses to Michigan. I fear what will be passed will do none of these things and that we will have made things worse not better. So what have we really accomplished? We have simply painted the room, re-arranged the furniture and called it tax reform.

The Michigan Fair Tax Proposal (House Joint Resolution L) would be the best tax structure for the state of Michigan and would guarantee revenue sharing for townships, cities, and counties by making all revenue sharing constitutional. The Michigan Fair Tax Proposal is transparent, simple and easy to understand, easy to adhere to, it would tax in-state employers and out-state employers the same, regardless where they are headquartered. It is competitive and would attract new business, and it is equitable and taxes all economic activity equally. If the House/Senate tax plan is enacted, the Michigan Fair Tax Proposal will be Michigan's get out of jail card.

The time has come for policy to trump politics. Michigan doesn't simply need a plan, it needs the right plan. The Michigan Fair Tax Proposal is not the Republican plan or the Democratic plan. It existed long before our present crisis; it has simply been adjusted to meet Michigan's needs, just as it has in Missouri and Georgia, where it has already been introduced earlier this year. The Lansing bureaucracy and those who live off the tax revenues do not want to lose control of how it is collected, who pays more and who pays less. Their goal is not equity, simplicity, or more competition, their goal is revenue and who controls it. The Michigan Fair Tax Proposal would strip the control from the government bureaucracy and put it into the hands of the people. It would constitutionally restrain government from imposing any new statewide taxes without a vote of the people, it would make government subject to the same economic up turns and down turns as its businesses and its citizens, and people would only pay tax on what they purchased. Now what could be fairer than that?"


Rep. Ward, having reserved the right to explain his nay vote, made the following statement:

"Mr. Speaker and members of the House:

This new Michigan Business Tax is a serious mistake. It contains special carve-out treatment for certain businesses and it is more complicated than the burdensome Single Business Tax it replaces. It is likely passage of this bill will result in a several hundred million dollar tax increase on Michigan's job providers. Our single state depression will only be worsened by the new MBT. A simplified business tax based on profitability would have been much fairer and less riddled with special interest provisions."


Rep. Emmons, having reserved the right to explain her nay vote, made the following statement:

"Mr. Speaker and members of the House:

The Michigan Business Tax, as passed, fails to provide tax relief businesses need for job creation. Because the plan is based on gross receipts, a business that does not make a profit could still pay taxes, similar to the former Single Business Tax. This is not an improvement to the business climate in this state. This is not a plan that will attract business and consequently the jobs they create."

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