Turning the Economy Around: Which Taxes Will Help Grow Business?

By: Tony Tagliavia Email
By: Tony Tagliavia Email

If Michigan's economy is going to turn around, new businesses will have to be started, those already in the state are going to have to grow and Michigan will have to attract business from elsewhere.

It's why the state is replacing it's business tax with a new one. Now businesses are talking about what they'd like that new one to be.

"We want to make sure the new tax structure rewards entrepreneurs," said Todd Anderson, vice president of government relations for the Small Business Association of Michigan.

The group favors credits to help sprout new businessm and a business income tax. Such a tax is part of both plans on the table.

An income tax isn't perfect, economists say, because it fluctuates with the business cycle, leaving the state with a less stable revenue source.

In the state House plan, the income tax would represent a little less than half of the revenue. It also taxes what's called net worth -- everything a business has minus what it owes, or assets minus liabilities. The House plan would replace all the revenue from the old tax.

But the state's auto dealers association has concerns.

"The tax bill has a very high business income tax rate and we don't qualifty for many of the credits," a representative told the finance committee of the state Senate.

The Senate's bill would bring in less money than the old tax. Businesses would be taxed on income and on gross receipts -- a tax on when businesses sell their goods. That's an issue for some manufacturers.

"We sell a lot of goods and if you sell a lot of goods you have a lot of receipts so it hurts us," said Chuck Hadden, head of the MIchigan Manufacturers Association.

General Motors is a key part of Lansing's economy -- and the economy throughout the state -- so where does it see the tax proposals?

"We would receive a reduction in the business taxes we pay in Michigan today," under the house plan, which GM Tax Director Richard Zablocki says the company supports.

That plan cuts the tax manufacturers pay on their equipment.

But some Republican senators say they're worried that plan is too big a handout to the Big Three.

Some compromise proposal will have to be reached. It's unclear how long that might take.

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