A new business tax plan detailed this week by the Michigan House Democrats would reward companies that create jobs in Michigan, but could shift more of the burden to those headquartered out of state and insurance companies.
The long-awaited House plan got support from Democratic Gov. Jennifer Granholm, who called it a “good compromise” that incorporates some of her own ideas. Senate Republicans didn’t rush to embrace the plan but didn’t shoot it down, either.
It could take at least a few more weeks for Granholm and the Legislature to figure out how Michigan will replace its current Single Business Tax, which expires at the end of this year. There are several competing plans, and a key issue in the negotiations may be how much revenue the new tax should bring in.
The debate will be folded into a broader discussion about how to fix Michigan’s ongoing state government budget problems.
Democrats say the revamped business tax should collect at least as much as the one it replaces _ nearly $2 billion a year _ to protect government services. Many Republicans would rather see some overall tax relief for businesses.
“The main focus of this plan is that it rewards businesses that invest in Michigan, whether it’s (research and development), hiring people or investing in equipment,” said House Speaker Andy Dillon, D-Redford.
Republicans were open to the plan, but said some elements could cause concern.
“It’s obviously not the Republicans’ No. 1 priority to have a revenue-neutral plan,” said Matt Marsden, spokesman for Senate Majority Leader Mike Bishop, R-Rochester. “But we certainly will give full consideration to what the House Democrats have put out today.”
Two different replacement plans have been introduced by Senate Republicans, including one backed by the Michigan Chamber of Commerce.
Unlike the Single Business Tax, the structure of the Democratic plan isn’t unique. Dillon said 24 other states have a similar framework, which means it would be easier to understand and more familiar to businesses that are considering investments in the state. Democrats said the plan borrows from other business tax proposals.
Roughly 75 percent of Michigan businesses could pay less taxes under the plan, Democrats said. That includes some manufacturers and small businesses.
About $700 million in new tax credits would be available for businesses that create jobs or make other investments.
The businesses that could face higher rates or overall bills would include insurance and possibly some other financial companies, and businesses that sell products here but haven’t done as much to create jobs within the state.
Democrats said they’re working with insurance companies and others who may not fare as well under their plan. A tax rate on insurance companies would increase from SBT levels, but credits available under the SBT could be retained.
Dillon said it would be more fair for companies to compare their tax structures to those in other states, rather than to Michigan’s expiring SBT.
The Democratic plan also reduces personal property tax rates for businesses.
Businesses need to know what their future taxes will be in a hurry, said Tricia Kinley of the Michigan Chamber of Commerce. She noted that one of the chamber’s members, a manufacturer, has three business decisions it can’t yet make because the company doesn’t know its future tax bills.
“I am optimistic we can get it out in the next few weeks,” Kinley said of a business tax agreement. “It’s extremely important.”
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