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Published: Monday, 2/13/2006

Tax fantasy Up North

L. Brooks Patterson, the flamboyant and often funny chief executive of Michigan's richest county, is launching a petition drive to put a proposal on November's ballot that would repeal the state's Single Business Tax, which provides Michigan with $1.8 billion in revenue every year.

There is no question that the SBT needs an overhaul; it is probably more unpopular than Osama bin Laden, especially with small-business owners.

The SBT, Michigan's only general business tax, imposes a 1.9 percent tax on payroll as well as income, meaning businesses must pay it even in years in which they lose money. Many see it as a disincentive to add workers or do business in Michigan. Succeeding generations of legislators and governors, including Jennifer Granholm, have promised to fix or replace it, but have dithered and done nothing.

A plan to gradually phase out the SBT by 2022 crashed when the latest state budget crisis erupted three years ago.

But what Mr. Patterson's approach would do is simply blow up the SBT without doing anything to replace the lost revenue. That would be a disaster. If Michigan's state budget ever had any fat, it has disappeared after four years in which the state has had to make painful cuts that have endangered the quality of higher education in the state. Republicans have said only that the SBT's repeal would result in a vast amount of new business that would more than make up the lost revenue.

That sounds like more of a pipe dream than the worst "Laffer Curve" fantasies of the Reagan-era tax cutters, who created mammoth federal deficits. Michigan is by law not allowed to run a deficit, and it would be impossible to cut $2 billion out of the state's budget without destroying the fabric of essential services, like schools and prisons.

A much saner approach is one being touted by the Detroit Regional Chamber of Commerce, which recommends replacing the SBT with an outright business-license fee. It would spare the smallest businesses and raise $1.5 billion a year. That proposal may need tweaking, but it sounds promising - and more sensible than either the status quo, or Brooks Patterson's bombshell.

Nobody questions that Brooks Patterson has been an able administrator of Oakland County, and he has been an artist at attracting new business to a rich county that now has more people than nine states in the union. But at 67 his career is winding down; he has lost bids for senator, governor, and attorney general, and there is a suspicion that part of this is Mr. Patterson saying, one more time, "Hey, look at what I've got."

We are, Brooks, and no thanks.



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