Filling Budget Gap Will Leave Gov. Snyder With Tough Choices

By: Liam Martin Email
By: Liam Martin Email

LANSING -- Gov. Rick Snyder made the promise again and again on the campaign trail -- repeal the four-year-old Michigan Business Tax.

A promise that is central on the minds of the state's business leaders.

"The tax burden for most companies has become so onerous, it's just a deterrent to job creation," says Tricia Kinley, a tax-policy expert with the Michigan Chamber of Commerce.

The MBT, signed into law in 2007 by former Gov. Jennifer Granholm to replace the much-maligned Single Business Tax, levies a 4.95 percent tax on business income, as well as a surcharge and a 0.8 percent tax on businesses' gross receipts.

The problem with eliminating the MBT and replacing it with a flat 6 percent rate, as Gov. Snyder and some House Republicans have suggested, is that such a move would add an estimated $1.5 billion to an already $1.8 billion deficit -- digging an overall hole deeper than $3 billion.

Which would mean massive cuts in spending.

"We would see major changes on the spending side, if it were all dealt with on the spending side," says Craig Thiel, with the non-partisan Citizens Research Council of Michigan. "I don't think you can get rid of a $3 billion shortfall through just efficiencies in the state government."

Suggesting, Thiel says, that the most likely budget solution will involve a mix of cuts and increased revenues.

Otherwise, the state would see major cuts to universities; payments to doctors; health care subsidies for low-income families; revenue-sharing with local cities and towns; and corrections funding, meaning potentially fewer prisoners incarcerated.

Solutions that are currently being discussed by lawmakers include a sales tax on services; a graduated income tax; more cuts to compensation for state workers and educators; and restructuring the state's tax structure to close loopholes and tax havens, among others.

Whatever the final compromise looks like, one thing is clear: It will require sacrifices from just about everyone in the state.


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