By John Bebow - October 4, 2007
Pitched in the bright Monday morning dawn as a luxury tax, the new tax on an odd variety of services in Michigan hits business harder than it does purveyors of luxuries. Some $450 million of the anticipated $614 million the new services taxes will collect will be paid by business, with the biggest hit coming to consulting firms.
That's exactly the wrong way to engineer the tax code if you're trying to attract 21st Century "new economy" service industries, argues Lansing economist Patrick Anderson.
The Center for Michigan has repeatedly hosted conferences where economists and state budget experts advocated more intense taxation of services. But they had caveats. First, they said, expand the base of items taxed, but lower the overall rate. That didn't happen in Lansing this week. Instead, an unfortunate few got whacked -- without warning or public debate. Second, the experts have advocated, true luxury services like entertainment should be taxed while business-to-business service taxes should be minimized. Lansing did just the opposite this week.
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Sometimes it truly seems as if our elected officials were sent here with the sole purpose of ramming Michigan's economy down a dark, dark hole.
This "services tax" is a great example. Taxing ski resorts but not golf courses, "consultants" but not lawyers and offering no rhyme or reason as to why businesses are being taxed and what do you have? Increased uncertainty and a perception of unfairness.
Uncertainty is bad for business, unfairness is bad for confidence and our current pattern of governance by the seat of the pants and at the will of those who lavish the most money is bad for Michigan.
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