June 2007 Field Report -
Southeast Michigan
By: Tony Daunt – Southeast Michigan Field Director
2 Down - 1 To Go
As many of you know, 2007 has been a busy year for the Michigan Legislature and Governor Granholm. After an especially nasty and expensive election season in 2006, the winners were faced with some very tough decisions as they started their new terms. They were faced with three daunting tasks:
- Re-balance the Fiscal Year 2007 budget, which had a deficit of $803 million (give or take a few million!)
- Replace the hated and expiring Single Business Tax (SBT) with something that would not only replace the revenue it produced for the state’s coffers but, more importantly, be an attractive incentive for businesses to locate and remain in Michigan
- Produce a balanced budget for Fiscal Year 2008 through a series of governmental reforms and possible revenue enhancements (i.e.; tax hikes)
Now that the halfway point of 2007 has come and gone, I am able to inform you that progress is being made in Lansing.
Granholm and some of her allies in the House and Senate wanted to handle all three of the problems at once, mainly in the form of expanding the sales tax to include more than 100 services, including real estate related services. Senate Majority Leader Mike Bishop (R-Rochester) insisted on dealing with each of these unique tasks one at a time, which we supported. Bishop’s position won the day and the legislature and Granholm began working on each task separately through committee hearings, workgroups and closed door negotiations.
Finally, as the end of May approached, the Republican Senate and Democratic House and Governor were able to reach an agreement on the FY 2007 after 5 months of partisan wrangling and political rhetoric. The budget agreement contains several million dollars in cuts, no tax increases and an overwhelming number of one-time fixes such as delaying $165 million in scheduled payments to public universities and community colleges until FY 2008 and securitizing $415 million in future tobacco settlement funds. And while it is definitely a victory for our association that Granholm’s 2 percent tax on real estate services was not part of the solution, the heavy reliance on accounting gimmicks only pushes the underlying structural problems into FY 2008.
And just this past week, all three leaders announced that they had reached a conceptual agreement on how to replace the expiring SBT. The new tax, to be known as the Michigan Business Tax (MBT), will be made up of 2/3 gross receipts (not to exceed a rate of 0.8 percent) and 1/3 business income (not to exceed a rate of 5 percent) and includes extensive credits for locating a business in Michigan and provides broad relief on a firm’s personal property tax liabilities.
The Michigan Association of REALTORS® worked closely with key members of the negotiating team from both sides of the aisle and leadership and staff were able to secure changes that provided relief from a number of objectionable provisions that could be found in the original version. As such, while we are not ready to declare victory, we are confident that the current deal takes care of many of our previous objections and places our members in a fairly good position as the formal language of the bills is written and all of the finer details are ironed out. As always, we will continue to keep you informed as the process moves forward.
Thankfully, the ability of the Senate, House and Governor to work together, despite deep differences in philosophy and often raucous debate has been restored to some degree. At the announcement of the SBT agreement, Bishop and Granholm, who engaged in some of the more rancorous finger-pointing during the process, appeared to be genuinely pleased with the progress they had made. At one point, Senator Bishop even told the media that they “might see a kiss before this press conference is over.” All of this bodes well for the state as leadership moves on to address the third and final task that I listed above: the Fiscal Year 2008 budget.
It has become apparent over the last few months that balancing the FY’08 budget, which is between $1.2 and $1.9 billion in the red, will include a mix of tax increases and governmental reforms. It is no secret that the MAR is very much opposed to raising taxes and fees of any kind without evidence of a meaningful restructuring of the way our government spends the money it already has. Many members of the legislature share this philosophy with us and have assured us that they will continue to push for significant reforms before they even consider talk of a tax hike. We will be sure to hold them to their assurances. This is sure to be an interesting summer in Lansing, full of posturing, fighting and, ultimately, compromise. They have shown us an ability to work together and solve two of the three problems and we expect the same on the third.
If you have any questions about this article or any other issue in state government, please do not hesitate to contact me at: tdaunt@mirealtors.com.
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June 2007
Field Report
• Field Report
Tony represents:
• Ann Arbor Area
• Dearborn
• Detroit
• CBOR
• Down River
• Grosse Pointe
• Lenawee County
• Livingston County
• MCAR
• Monroe County
• North Oakland County
• Western Wayne Oakland County
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