LANSING -- Gov. Jennifer Granholm today endorsed taxing the sale of most personal services, reducing the sales tax rate from 6 percent to 5.5 percent, and using the proceeds to cut business taxes and bolster funding for K-12 schools. The tax overhaul provides the foundation of the fiscal 2011 budget plan that Granholm presented to lawmakers in the Capitol this morning. The blueprint closes an estimated $1.6 billion gap in revenues and expenditures.
Additional revenue from the tax would finance a phaseout of the $600 million, 2007 surcharge to the Michigan Business Tax and provide an immediate $500 million for the state school aid fund.
The base would continue to exclude business-purchased services, health care and education such as college tuition. It presumably would include services such as entertainment, car repair, dry cleaning and could include accounting, legal and insurance.
Rep. Mark Meadows, D-East Lansing, has a bill to expand the base and reduce the sales tax rate to 5 percent. The key for Granholm and supporters of the idea will be to identify what services will be taxed and then protect the list from an expected lobbying onslaught from interests seeking carve-outs. A 2007 sales tax expansion collapsed, and was replaced by the MBT surcharge, because it was riddled with loopholes. Ski tickets were taxed; golfing fees were not.
"As this gets more serious, we're going to have more people coming in and saying it shouldn't include us," Meadows said. "It's better to have everybody in (the base) so no one feels jealous about who gets out."
Another flashpoint will be Republican resistance to a tax plan that generates net new revenue for government services and education. Any tax overhaul, said Sen. Mark Jansen, R-Gaines Township, also has to come after passage of reforms, such as his proposal to make every public employee in the state contribute at least 20 percent toward of the cost of health insurance.
The Business Leader's plan is revenue neutral overall in that every dime of additional sales tax revenue pays for eliminating the MBT surcharge and cutting a key MBT rate on business revenue.
But the business community is split over the idea.
Michael Johnston, head of legislative affairs for the Michigan Manufacturers Association, said every business in the state would benefit from BLM's plan. "We compete on the basis of cost with the lowest cost location in the world," he said. "Our tax policy, if it's going to be successful in creating jobs, has to understand that dynamic."
Richard Studley, president of the Michigan Chamber of Commerce, said business tax reduction should be paid for through meaningful reductions in the size of state government, not "overly complicated, meaningless tax shifts. The problem isn't the method of taxation, it's that we're losing taxpayers."
Now why did I put that title up to include liberal republicans? It's because of this. Business Leaders of Michigan. I heard a lot of touting of them up at last years Mackinac Conference. I discussed there proposals when it came out back in 09. Some of it was good. Some of it was horrible. The sales tax was horrible, and Granholm had a point asking where the support was from them when she pushed a lower 2 cent services tax. These people want it higher.
BOTH are wrong. Damn wrong. I'll be making some phone calls. We need to call our reps and let them know that new taxes are unacceptable, and that we control the Republican Party, not Business Leaders of Michigan. When Business Leaders of Michigan are right, we will support them. When they are wrong, we don't.
This is a tax increase. Period. 1/2 a cent off the sales tax and 5.5 cents increased on things that aren't taxed, so bigger businesses don't have to pay a surcharge. While I agree that the surcharge has to go, the solution isn't increasing taxes on everybody. The solution is less government, more freedom, real reform, less gimmicks, and tightening of the belts.
There's also this from The Detroit News
Gov. Jennifer Granholm today proposed cutting the sales tax, extending the levy to some services and using the extra revenue to ratchet down business taxes over two years and stave off a $400 million reduction in public school funding. She also called for using a tax credit to reinstate the $4,000 Promise scholarships for college students while requiring graduates to work in Michigan at least one year to be eligible. Further, she would slap a 3 percent tax on physicians' profits to help finance Medicaid health care for the poor and a surcharge on airport rental cars to fund the Pure Michigan tourism promotion.The Doctor's tax proposal is back! Rent a car tax to fund commercials. This budget is a shell game and gimmicks, just like every other one I've seen for the last eight years.
Granholm also proposes maintaining public school and higher education spending and revenue sharing at current levels. She also would not cut trooper numbers.
This is like most Granholm budgets, unacceptable.