Michigan Business Lawyer Blog

A number of Michigan's biggest companies are asking the legislature to raise one business tax and kill another. While everyone seems to agree that Michigan's new 6% service tax is a bad idea, the alternate plan being pushed by Michigan big business would shift the major portion of the business tax burden to thousands of smaller businesses. The big businesses supporting the new plan include the Big Three automakers, and big insurance and banking companies.

The Michigan House of Representatives has obliged these big companies, by passing legislation that would replace the unpopular service tax with a 32.9% surcharge on the new Michigan Business Tax. It is unclear at the present how the Michigan Senate will deal with this legislation. The Michigan Business Tax is scheduled to replace the Single Business Tax on January 1, 2008. The Michigan Business Tax gives gives increased tax breaks to manufacturers and other enterprises that invest in facilities located in Michigan and hire Michigan employees.

The 32.9% surcharge would be imposed on sales and income and would be applied before tax credits. The reason why big business is behind the surcharge plan is that there is a cap on the surcharge so that no single business would pay more than $2 million per year. $2 million per year is a fraction of what the Big Three would pay under the service tax. This is because these companies use so many different kind of services that will be included in the new service tax such as landscaping, consulting, warehousing, and janitorial.

The 6% service tax was a hastily put together solution reached on October 1, 2007 in order to keep the Michigan government from shutting down due to a budget shortfall. The service tax has received very bad reviews from businesses big and small. The surcharge proposed under the Michigan Business Tax would replace all revenue that the service tax is estimated to raise, which is $614 million this fiscal year and $750 million the next.

Michigan's business tax situation is far from settled, with a variety of plans being proposed from a number of different corners. Depending on the exact proposal, it can be difficult to map out which companies will lose and which will win in the final analysis. However, one thing is sure, all of this uncertainty cannot be good for attracting new companies and businesses to Michigan.