December 2006 Field Report -
Southeast Michigan
By: Tony Daunt – Southeast Michigan Field Director
The Michigan Mystery: What will replace the Single Business Tax?
There is an old Donovan song where he sings, “First there is a mountain, then there is no mountain, then there is.” Knowing Donovan, this likely is some veiled reference to illegal substances, but for us, it represents the attempts Michigan’s state government has made to replace the Single Business Tax (SBT).
When the Republican Legislature passed legislation to eliminate the SBT, the governor vetoed the bill, saying she wanted a replacement before the tax was abolished. Citizens, led by Oakland County Executive Brooks Patterson, gathered signatures and petitioned the legislature to pass the bill again, and because of their signatures, the Governor could not veto it.
The tax was eliminated and the debate was on: How much (if any) would be replaced? Who would pay? On what would the tax be based?
In the spring, the governor released a proposal which would have shifted tax burden away from the manufacturing sector and put it on the insurance, banking, and real estate sectors of the economy.
That plan was soundly rejected by the Legislature.
During the campaign, Gov. Granholm committed to replacing the full amount—roughly $1.9 Billion (about 22 percent of the general fund). Challenger Dick DeVos only committed to replacing half—opening himself up to attacks that he would be slashing services and throwing people out on the streets.
Granholm has now proposed the Michigan Business Tax (MBT) as a replacement. It would tax income and create a new tax on assets. We are working to assess the impact the new tax would have on members, but early indications are that those that own commercial properties, rental properties, or apartment buildings would see a tax increase.
The replacement tax debate is dead for the remainder of the current session and will be brought up again when the Legislature reconvenes in the beginning of next year. Granholm has made it clear that she wants the current Legislature to “clean up the mess it created,” but with the little time left, they wisely left the issue unresolved until next year. It would have been terrible to rush to create a new tax by the end of the year, only to create unintended consequences that would need to be addressed next year.
One issue we have is that the Treasury department began with a number and thought “how do we get there?” We would like to see sensible business tax policy in Michigan whether it raises less than $1.9 billion—or more. We are studying the proposal closely and are meeting with members of the Treasury Department to see exactly what this would do to members of the Michigan Association of REALTORS®.
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