Michigan Legislature Going for Tax Compromise

The Michigan Legislature is looking to replace the state's new extension of the 6 percent sales tax with a 33 percent surcharge on its new business tax, aptly labeled the Michigan Business Tax, which effectively replaces the old Single Business Tax (which was a carbon copy of Europe's old "value-added tax" that applied to the sale of volumes of goods, income, rent payments, remuneration of employees, etc.).

The following excerpt showcases the nightmare after the state's short-lived partial shutdown:

LANSING -- The Senate today will interrupt its two-week November recess to work on a compromise to repeal a new tax on services and replace it with a bigger business tax.

But a final deal with the House must wait until at least next week, when the House returns from a traditional hunting-season break.

Senate Republicans plan to rework a House bill that would kill the service tax scheduled to take effect Dec. 1 and replace it with a 33% surcharge on the Michigan Business Tax (MBT).

The Senate version is likely to reduce the amount of the surcharge and raise the maximum amount any single business would pay. The House bill sets that limit at $2 million, which critics said would benefit the state's largest companies -- especially the three Detroit automakers -- at the expense of midsize businesses.

Senate GOP spokesman Matt Marsden said the Senate proposal, like the House plan, would fully replace the revenue lost by repealing the tax on services.

But unlike the House plan, the Senate proposal would make the business tax increase temporary, he said. That could be problematic because Gov. Jennifer Granholm has threatened to veto any replacement of the services tax that is not a permanent tax increase.

Question to any collectivist who reads this blog: are you sure you want to stick your story that there is a dime's difference between the Republicans and the Democrats? You sure you want to wager on that?

(See Patrick L. Anderson's Single Business Tax piece at the Mackinac Center for Public Policy.)