Michigan Governor Signs New Michigan Business Tax Bill into Law
On Thursday, July 12, 2007 Michigan Gov. Jennifer Granholm signed into law a replacement for the controversial Single Business Tax that its supporters said would jump start the languishing Michigan economy. The Single Business Tax had long been hated by businesses in Michigan, and was seen by many as one of the factors that discouraged more businesses from investing in Michigan. Gov. Granholm has stated that she believes the new tax will give everyone in Michigan the opportunity to promote the state as "open for business."
The new tax law is called the Michigan Business Tax (MBT) and begins collections on Jan. 1, 2008. MBT is supposed to help small businesses and manufacturers, allow the state to diversify its economy and provide the investment in areas like public education by keeping a revenue neutral tax in place. MBT is a business income tax. It has a rate of 4.95% combined with a 0.8% tax on net worth. Banks and insurance companies will pay an alternate net worth tax at the rates of 0.235% and 1.25%, respectively. MBT also includes a number of credits toward a business's liability for increased payroll, as well as capital and research investment.
MBT provides breaks for small businesses. Under MBT, small businesses will be responsible for paying the tax only if their sales are above $350,000, with tax liability phased in after that point. There are also exemptions for start-ups and businesses that 20 or more jobs.
Overall, Gov. Granholm and her allies are predicting that small businesses will see a $125 million to $150 million cut in their current tax liability and that 73 percent of all businesses will see a reduction in their taxes.
Just about everyone agrees that the Single Business Tax was pretty much a jobs killer. However, it remains to be seen whether the MBT offers a true solution to Michigan's economic woes or whether it will create different -- but equally as vexing --problems for Michigan businesses.
