Michigan Business Tax Proposal to replace SBT

[vear01]

Michigan has again come up with a unique tax plan that is so complicated that you will need a MBA and a large multi page excel spreadsheet to evaluate the effect on a individual company. Review see http://www.sbam.org/content.php?id=665 Excel quick look

http://www.sbam.org/download.php?id=665&file=1

Great for the accountants who can understand it, bad for drawing new businesses to Michigan. Hence, no new clients. Great for other states.

Personally, I favor what is called the "Michigan FAIR tax" which repeals the Michigan income tax, personal property tax, business-to-business sales tax, sales tax on auto trade in value with an increase in sales tax rate from 6% to 8.5%-9.5% expanding it to most services to end users. Accountants would have to charge sales tax to individuals--but not to businesses. It would make Michigan a "business tax-free" state , with the goal of attracting new businesses to kick-start our failing economy. We have lost almost 7% of our population in my rural county in the past year alone! Which includes 7% of tax returns and accounting services.

What do the rest of the accountants and tax preparers think of Michigan’s new tax proposal?
The Legislature will probably vote on it this week.
I plan to submit my concerns to my elected officials. Any thoughts or comments would be appreciated to incude.

[Jiggers]

Michigan Tax

Didn't vote in the pole, I am in Texas. However, our "glorious" state legislature in all of their wisdom has changed our annual corporate franchise tax to a margin tax.

The corporate franchise tax was based on the 1996 Internal Revenue Code. This required adjustments converting current year income to applications that related to the 1996 code. For instance, no 30%/50% bonus depreciations, no Sec 179 over $25,000, no Sec 179 on computer software purchased, etc. These adjustments carried to the balance sheet which also had implications in the tax calculation.

Now they have converted to a "Margin" tax. Me and all others are trying to figure this one out. Our State Comptroller's office just prints the law and makes interpretations afterwards, usually during an audit! I asked about seminars to help us. That won't be coming any time soon.

Lots of luck in Michigan.

[jainen]

If I worked in Michigan

>>charge sales tax to individuals--but not to businesses<<

Business purchases are not taxed, and neither is compensation. So if I worked in Michigan, I would buy everything through an employee benefit plan. I would escape taxation completely... at least, except for that prebate check!

[George Boutwell]

The 800-pound Gorilla

The real problem in Michigan and other Rust Belt states is the property tax. Michiganders are weird; they talk about "winter tax" and "summer tax" as if those were normal terms that people in other states use. The proposals sound like patches that the legislature can carry out without needing local authorities to cede power and money.

[Corduroy Frog]

Matt Sova

Matt, are you out there? You once called the existing Michigan Single Business Tax the world's stupidest tax. Not familiar with it, but if you are correct, it must really be bad.

Was in Michigan about a month ago. All I heard on the radio was the state was broke, but I drove your highways a good 700 miles (including the U P) and I would average stopping for construction every 40 miles or so.

So whad'dya think of the new proposal? Whatever happens, I'm sure it is not "revenue neutral."

[Corduroy Frog]

Post-Katrina Louisiana

Contrast the mess in Michigan with Louisiana. One of the companies for whom I do consulting work has an operation in Louisiana.

Louisiana has always been a "low-tax" state, like most of the South. But we had hostile relations with them nonetheless. Employers paid a horrendous workers comp premium to the state-run program, maybe because of "jackpot justice" in the court system, I don't know. Arbitrators were called in when people quit and drew unemployment -- employers got beat up routinely.

After Katrina, the whole complexion has changed. Courtesy, and every attempt to cut taxes and grief for employers. Amazing what a government can do when they are in "catastrophe" mode.

Rust-bowl states should learn from this. Apparently the area of Michigan from Kalamazoo southward toward Chicago, the lower southwest quadrant of the state, is enjoying an economic boom. A friend of mine lives 20 miles north of Grand Rapids, and fears the new tax will kill the goose with the golden eggs. The rest of the state is suffering, big-time. My brother lives in suburban Detroit and says it has never been this bad.

Taxes on his house are $5000 per year. He is single, and could fit three of his houses into my house. Fortunately he has a rental home in another state if he ever has to leave Michigan.