By John Bebow - October 24, 2008
Doug Drake tried to warn us.
"Are you ready for some grumbling?" Drake asked a crowd two years ago at a statewide tax policy conference hosted by the Center for Michigan. A veteran of many state budget and tax fights, Drake raised concerns about the prospects of replacing Michigan's old SBT business tax.
Let me remind you of the crazy legacy of business tax "reform" dating back to the beginning of 2006…
Acting on pressure from business groups who said the SBT was an unfair, unreasonable, and overly complicated choke on growth, the Michigan Legislature voted in March 2006 to repeal the SBT, the state's main business tax, without offering any kind of replacement. "We are taking action because we cannot wait another minute," then-Speaker of the House Craig DeRoche declared. Nearly two years of unproductive, partisan in-fighting ensued, resulting in a near-government shutdown and a much-maligned new business tax, the MBT, with a 22 percent surcharge that instantly turned purple the faces of accountants everywhere.
Now comes a poll from Crain's saying businesses preferred the old SBT to the new MBT.
"Most businesses had conformed their practices to the SBT, understood the SBT, and while there were aspects of it they didn't like, it was a known quantity," said June Summers Haas, a partner at Honigman Miller Schwartz and Cohn and a recognized state tax expert.
At this point, it's hard to understand how anybody who's been involved in tax reform — the governor, legislators, chambers of commerce, lobbyists, convening groups like the Center — can feel anything but shame and embarrassment at this debacle.
Shouldn't the business groups who pushed for SBT repeal be just as concerned about a credibility problem as the elected folks in the Capitol? Aren't we all better than this? Michigan certainly deserves better.
2 Comments
The question is not what to do about the MBT. The question is: what do the Michigan business taxes need to be changed to or eliminated to compete with the new Ohio busines tax structure, NAFTA (Mexico and Canada), and the global economy?
To get out of the circular thinking we need to broaden our dialog to look at all taxes – personal and business. We need to seriously look at what exemptions and subtractions are allowed and ask ourselves a rather simple question:
If every citizen/business is getting benefits from the services provided by our state revenues, then shouldn't every citizen be contributing something to help support those services?
I would hope that everyone would be able to answer Yes to this question. If the answer is Yes then we need to go back to the details of the tax rules for all taxes and see what is not being taxed. That will open everyone's eyes I am sure.
Subtractions from personal taxes are well over $21 Billion (2005 numbers for AGI over $50,000). These subtractions enable many taxpayers to not pay any personal income tax because all their income is exempt from income tax. Many of these taxpayers are not over age 62 and retired, they are very active individuals who are enjoying the benefits of what the programs are that are paid for with tax dollars. Appears to me, if I am using the services or getting the benefits of the services then I should be paying for them by paying my share of the taxes.
If we could get to that level of agreement then I think we would be able to solve the problem.
I don't think we accomplish much when we elect to tax the business community because they are easy targets for a tax when the business just passes on these taxes to the same individual who is not directly paying his/her share of taxes on their income.
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