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Published: Tuesday, 1/1/2008

New '08 new business tax for Michigan making some unsure if measure is an upgrade

ASSOCIATED PRESS

LANSING - Some despised Michigan business taxes were killed off in 2007.

But it remains to be seen whether the new Michigan Business Tax, which went into effect today, will be any more welcomed than its predecessors by the companies that pay it.

The original Michigan Business Tax won praise from businesses when it was adopted in the summer. It was estimated that up to seven of 10 businesses would pay less under the new format than under the Single Business Tax it replaces.

But the MBT lost some of its luster Dec. 1, when lawmakers added a surcharge of about 22 percent to the tax that will make it more expensive for some companies. The surcharge was crafted to replace an unpopular 6 percent tax on some services.

"We have some serious concerns that the new MBT will be not much better than the Single Business Tax," said Tricia Kinley of the Michigan Chamber of Commerce.

The Single Business Tax was scrapped in part because it was confusing, especially to companies dealing with it for the first time. But Ms. Kinley and others worry its replacement isn't much easier to follow.

The SBT also was labeled as anti-business, with both Republicans and Democrats saying it was time for it to be replaced with a friendlier, more competitive structure.

The new tax is based on modified gross receipts and income.

It is designed to give tax credits to companies that add jobs, invest in equipment, or do research and development in Michigan. The deal also provides some personal property tax relief for businesses on equipment and machinery.

"It rewarded Michigan businesses for doing the things we want them to do," said House Speaker Andy Dillon (D., Redford Township).

Out-of-state companies and some financial services firms won't fare as well under the MBT as under the old tax structure. Many insurance companies will have higher tax bills, but at least they were exempt from the surcharge.

Insurers "took a hit" from the MBT, said Peter Kuhnmuench, executive director of the Insurance Institute of Michigan.

The surcharge replaces a sales tax on some services that lawmakers passed to avoid a prolonged government shutdown Oct. 1, only to repeal it about a month later.



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