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Michigan House Votes to Replace Service Sales Tax

Posted in News, Archive, News, Happenings

On Nov. 8, the Michigan House passed a bill that would kill a 6 percent sales tax on self-storage and other services and replace the lost revenue by raising the state’s main business tax. Lawmakers and business owners say the tax shouldn't take effect as scheduled Dec. 1 because it's unclear and unfair because it taxes some services but not others. They say it would also make Michigan a less appealing place to do business, but they’re divided on if and how to replace it. 

The bill passed by a 58-48 vote, with Democrats in the majority supporting the measure and all but two Republicans opposing it. Negotiations continue because the bill would add a permanent surcharge to the new Michigan Business Tax that takes effect Jan. 1. Republicans who control the Senate and business groups want the replacement tax to be temporary, and there's disagreement over how much additional companies should pay. Other business groups oppose any replacement tax.
Manufacturers, automakers and other businesses support adding a 33 percent surcharge to the MBT, with no company paying more than $2 million extra. They'd rather pay a single higher tax than face compliance costs and uncertainty under the service tax.
Some Republicans said they'd prefer to build a tax increase into the MBT base rate rather than tack on a surcharge. About 190,000 Michigan businesses that will pay little or no MBT wouldn't be affected by the surcharge.
The linchpin to successfully killing the 6 percent sales tax is making up for the revenue lawmakers and Democratic Gov. Jennifer Granholm have designated for public schools and other government services.

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