Mich.: New business tax debuts in 2008

Mich.: New business tax debuts in 2008

	Published : Mon, 31 Dec 2007 20:54 By : Agencies Print this Story

LANSING, Mich. (AP) - Some widely despised Michigan business taxes were killed off in 2007.

But it remains to be seen whether the new Michigan Business Tax, which takes effect Tuesday, will be any more welcomed than its predecessors by the companies that have to pay it.

The original Michigan Business Tax won praise from a variety of businesses when it was first adopted this summer. It was estimated that up to seven of 10 businesses would pay less under the new format than under the Single Business Tax it replaces.

But the MBT lost some of its luster Dec. 1, when lawmakers added an about 22 percent surcharge to the tax that will make it more expensive for some companies. The surcharge was crafted to replace an unpopular 6 percent tax on some services.

'We have some serious concerns that the new MBT will be not much better than the Single Business Tax,' said Tricia Kinley of the Michigan Chamber of Commerce.

The SBT was scrapped in part because it was confusing, especially to companies dealing with it for the first time. But Kinley and others worry its replacement isn't much easier for businesses to follow.

The SBT also was labeled as anti-business, with both Republicans and Democrats saying it was time for it to replaced with a friendlier, more competitive structure.

The new MBT is based on modified gross receipts and income. It is designed to give tax credits to companies that add jobs, invest in equipment or do research and development in Michigan. The deal also provides some personal property tax relief for businesses on equipment and machinery.

'It rewarded Michigan businesses for doing the things we want them to do,' said House Speaker Andy Dillon, a Democrat from Wayne County's Redford Township.

Out-of-state companies and some financial services firms won't fare as well under the MBT as under the old tax structure. Many insurance companies will have higher tax bills, but at least they were exempt from the surcharge.

Insurers 'took a hit' from the MBT, said Peter Kuhnmuench, executive director of the Insurance Institute of Michigan.

'But it's not of such a magnitude it will chase people out of Michigan,' he said.

The surcharge replaces a sales tax on some services that lawmakers passed to avoid a prolonged government shutdown Oct. 1, only to repeal it about a month later.

The 6 percent sales tax on several services including landscaping, warehousing and consulting may have been despised even more than the SBT. Businesses across the state campaigned against it to make sure lawmakers repealed it.

But some businesses are not happy about the alternative approved by lawmakers, either. Some are concerned that tax credits made available under the initial MBT will be eroded under the new agreement reached a month ago, making it less attractive of a deal overall. Even some of the initial MBT's biggest supporters are concerned about the recent changes.

The Michigan Manufacturers Association says the surcharge was the lesser of two evils when compared to the services tax. But the manufacturers' group may make it a priority to get rid of the surcharge in 2008. The group is searching for what it calls 'politically viable options' for replacing the surcharge.

Chuck Hadden, Michigan Manufacturers Association vice president of government affairs, said in a statement it's time for Michigan policymakers to 'look inward to solve the revenue problem instead of using burdensome business taxes as the ultimate solution.'