LANSING - Repeal of Michigan's 30-year-old single business tax got a jump start Thursday by House Republicans who voted out a repeal bill in committee and called on Gov. Jennifer Granholm to get on board or become a bystander to one of the biggest tax changes in Michigan's history.
Republicans say they aren't arguing that business should get a free tax ride, but that their fare should be fair; while Democrats, trying to amend the bill before the House Tax Policy Committee, requested that the repeal not take effect until a replacement tax is put into place. HB 5743 would repeal the tax for tax years beginning after September 30, 2007. The bill was reported out of committee on straight party-line votes with the Democratic amendment failing.
Oakland County Executive Brooks Patterson, who is also sponsoring a petition drive to get the SBT repeal approved by the Legislature, bypassing the governor's veto pen, was the only person to testify before committee. Patterson said that the petitions have been printed and that if the Legislature has not gotten the bill signed by Governor Jennifer Granholm by May 31, he will move forward with his proposal.
Taking criticism from some Democratic members who questioned why Patterson took the bold move of agreeing with the governor's SBT proposal last year and then doing an about-face, Patterson said he went along with her idea because at the time it was the only game in town.
He said replacement revenue from a new business tax should not be dollar-for-dollar, but that the $2 billion revenue should be replaced with something that brings in approximately $1.3 billion. Although spurring debate on the SBT and collecting $800,000 to get his proposal rolling, Mr. Patterson said, "My role in this is finite."
While he's working to wipe the SBT slate clean, it will be up to lawmakers in Lansing to put the pieces of the replacement puzzle together. That drew comment from Rep. Doug Bennett (D-Muskegon), who said, "There's more to leadership than pointing out the problem. The solution should come with it."
Patterson had previously said, "I can't think that anybody in leadership would not want the opportunity to lead," referring to Granholm.
Rep. Andy Meisner (D-Ferndale) also called Patterson's proposal "half a plan," arguing that 60 percent of businesses in the state don't pay the SBT anyway and that businesses take services, location and educated workforce into consideration more than the tax policy of a state.
House Speaker Craig DeRoche (R-Novi) said moving the SBT deadline up will provide lawmakers 21 months to figure out a replacement, as is being reviewed by Rep. Fulton Sheen (R-Plainwell), who chairs both the Tax Policy Committee and Tax Restructuring Subcommittee. "I've negotiated tax cuts before with the governor and it will take more than four months," DeRoche said, as he compared the crisis of the SBT with the property tax/Proposal A completed within four months by lawmakers in the 90s.
Granholm said in a statement that she is on board with eliminating the SBT as long as the legislative proposal protects families. She also said the replacement must be revenue neutral.
"I have proposed sweeping changes to the SBT because it is a bad tax," she said. "However, the only thing worse than the SBT, would be shifting that bad tax to the backs of families. This proposal would force families to pay $700 more each year in additional taxes or force deep cuts in health care and education, or both. While we need to make our business climate more competitive, we cannot, and I will not, shift the billon dollar tax burden onto the backs of working men and women in this state."
Specifically saying she will not support cuts to health care and education, Granholm also said eliminating the SBT with no replacement on hand is "fiscally irresponsible and utterly ridiculous."
During the press conference, DeRoche said not having a replacement but knowing the SBT is going away provides businesses with some uncertainty but hope. "The business taxes should be replaced with business taxes," he said.
It shouldn't take a tax credit and a ribbon cutting to get 100 or more jobs created in Michigan at a time, he said of recent reports of new jobs in the state by the Michigan Economic Development Corporation and Ms. Granholm. Instead, Michigan should aspire to have a better policy in place that attracts thousands of jobs at a time, he said.
DeRoche said he does not support the so-called Fair Tax as it has technical problems - mainly because it would put an undue burden on consumers by raising the sales tax. It also would require Michigan voters to amend the Constitution, which is not likely to be an easy ride for legislators.
The other two proposals out there - a business activities tax and business licensing tax - are going to be reviewed by lawmakers, along with a study put on by Patrick Anderson, DeRoche said. During subcommittee testimony this week, the Tax Foundation said that the Fair Tax would bring Michigan's business climate rating into the top ten, while the other two proposals, which are still better than the SBT, were likely to have less impact on the rankings.
While no members of the Senate were present for the press conference, DeRoche said Republicans in that chamber are supportive of the movement.
Senate Majority Leader Ken Sikkema (R-Wyoming) also compared accelerating the elimination of the SBT earlier to the Legislature eliminating school taxes - nobody knew what the replacement revenues would be for ending property taxes for schools but everyone knew replacements would be needed.
"Absolutely" there will be replacement revenues, Sikkema said, but he would not say at what level they should be and refused to answer specifically if they should be a dollar-for-dollar replacement. Nor did he say what kind of tax he would support to replace the SBT.
And while he said he supported the accelerated elimination of the SBT, Sikkema also reserved the right to "tweak" the proposal. Though he refused to say how he would tweak it.
Business groups came out in overwhelming support for the SBT repeal, with the Small Business Association of Michigan's President and CEO Rob Fowler saying, "We wholeheartedly back this effort to eliminate this SBT even sooner than its schedules 2009 repeal, we are financially supporting the petition drive and we are urging small business owners to sign the petitions."
He added, "There are a number of plans being discussed. The SBT is onerous but so is the overall tax structure in Michigan. It's not a structure that is conducive to a state like Michigan that is trying to revitalize economic growth."
Only 19 percent of small business owners gave the SBT a positive ranking according to the latest Small Business Barometer survey, Fowler said.
The National Federation of Independent Business also complemented the actions of Republican lawmakers, with state Director Charles Owens saying, "We have been talking about (the repeal) for decades and we now have the opportunity to finally do something about it."
"The fundamental problem with the Single Business Tax is its architects determined the overriding goal of Michigan's business tax policy should be the revenue needs of the state rather than growing jobs and stimulating our economy. We cannot afford to make this mistake again."
The Michigan Chamber of Commerce's Rich Studley said that Mr. Patterson is making a presentation before the organization's tax board and that they will report to the full chamber board before a statement is made. During committee, the Michigan League of Human Services, AFL-CIO and United Auto Workers submitted opposition to the bill.
This story was provided by Gongwer News Service. To subscribe, click on Gongwer.Com