LANSING – Michigan House Republicans will pursue a counterproposal to Democratic Gov. Jennifer Granholm's plan to overhaul business taxes that contains the parts of her package that they like best – putting on hold radical changes to the tax structure that were under consideration.
The House Tax Policy Committee is expected to meet next week and could vote on the GOP plan. Rep. Fulton Sheen (R-Plainwell), the committee chair, said Republicans have not yet completed their counterproposal, but it would take what they consider the best of Granholm's plan and improve upon it.
Granholm's plan would cut the Single Business Tax rate from 1.9 percent to 1.2 percent, change the tax's formula to base it 100 percent on sales, provide a credit to manufacturers on personal property taxes paid, end some current credits like those for unincorporated companies and create a 2 percent tax on insurance companies' premiums (SB 295, SB 296, HB 4476, HB 4477). The administration says the plan would reduce taxes for 76 percent of businesses that pay the SBT and especially aid struggling manufacturers.
Republicans have objected to the higher tax on insurers and changes that would raise taxes for other businesses.
Sheen said the proposal could involve the credit toward the SBT on personal property taxes paid, but broadening it beyond just manufacturers. The GOP plan also would likely include changing the tax's formula to base it entirely on sales.
The movement toward taking action on portions of Granholm's plan indicates that House Republican leaders have chosen between two camps that had formed on how to handle the tax issue. One camp favored action exactly along the lines of what the House apparently will do. The other favored wholesale changes to the tax code.
Sheen is the principal backer of the latter group: blowing up the state's tax structure and starting anew with his preferred idea of a consumption tax that would mean a higher sales tax extended to almost all purchases. But other Republicans recognized that type of plan would take months to assemble and require a statewide vote if it impacted the sales tax.
With the state's economy seen in critical condition by everyone in the Capitol, waiting that long simply was not an option. Sheen said work on the overall tax structure would still occur, but later in the year.
"That's not something we can do immediately," he said of a grand plan. "Let's do something now - something right away to help everybody."
Rep. Paul Condino of Southfield, the top Democrat on Tax Policy, said he knows no details of what the Republicans will propose, but senses they will pursue some replacement revenue for the tax cuts they pursue.
Condino said Sheen mentioned that the GOP is interested in creative ways to pay for the tax cut. Condino said he has been working with Republicans to provide them data from the Department of Treasury. Notably, they have asked him to provide information on how much revenue Granholm's proposed elimination of certain tax exemptions would create.
"Finally, that's starting to hit home," he said of revenue-neutrality, which Granholm and Democrats have said is the one non-negotiable piece of any tax plan.
Granholm press secretary Liz Boyd said the administration hopes the developments signal that the House "is genuine in its interest in taking up the governor's business tax restructuring plan." Although Boyd said it is difficult to comment on the Republican plan until it becomes more concrete, she said the governor continues to push for tax restructuring that lowers taxes on small businesses and helps major job providers - in a revenue-neutral fashion.
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