Corporate Eyes Focussing On Tax Cut Proposals

May 17, 2002
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Upcoming legislative initiatives in Lansing and Washington that affect financial prospects for corporations and small businesses are best summed up in a single word: taxes.

In Washington, D.C., all eyes are on Congress and how it will treat President George W. Bush’s tax-cut proposal. Business groups generally like the plan, particularly at a time when economic growth is slowing.

Lawmakers in Lansing, meanwhile, may be hard-pressed to trim state taxes this year, given the governor’s recent budget proposal that reflects the slowing economy and tightening revenues.

But that doesn’t mean that business advocates won’t press for changes.

“Part of it is just the belief among individuals and businesses that they ought to keep more of the money they earn,” said Nancy McKeague, senior vice president for administration for the Michigan Chamber of Commerce.

Among the issues that business groups will push is accelerating the elimination of the single business tax (SBT) in Michigan. The Legislature last session decided to gradually eliminate the SBT — which generates about $2.2 billion annually for state coffers — over a 23-year period.

The Small Business Association of Michigan (SBAM) plans to lobby lawmakers to speed up the tax’s elimination to a 7- to 10-year period, said Barry Cargill, the association’s vice president of government relations.

Those efforts, however, may largely involve setting the groundwork for action down the road. With the economic slowdown squeezing state revenues, Cargill doubts lawmakers in Lansing will act on any significant tax cuts this session.

“It may take a session or two,” Cargill said. “It certainly is at the top of our agenda and will remain there.”

McKeague is much more optimistic, saying “the discussion will certainly begin” on accelerating the single business tax’s elimination. Doing so has broad support among lawmakers, particularly with Gov. John Engler's recent proposal to do away with the SBT for newly formed high-tech companies as a way to lure them to Michigan.

Engler sees the move as taking “the next step in putting Michigan’s economy at the forefront of the New Economy.”

McKeague believes consideration of Engler’s proposal could lead lawmakers to consider a faster elimination of the SBT for all businesses. Many businesses, she said, are lukewarm to the governor’s proposal, seeing it as unfair.

“They do feel overlooked. They’ve been here all along and created jobs and been good taxpayers and they still come under the burden of the SBT,” McKeague said.

Another issue on the SBAM’s agenda in Lansing is reforming the personal property tax in Michigan levied on business equipment and machinery.

The association would like to see changes such as eliminating the tax for home-based businesses or establishing a threshold of $100,000 or more in assets before the tax is levied.

But the personal property tax generates revenues for school and local governments. Eliminating it “is not realistic at this point,” since any changes would likely have to address the lost revenues for schools, Cargill said.

“We want to make sure the education system remains strong,” he said.

The state chamber, meanwhile, hopes to trigger “an awful lot of discussion” on employer-sponsored health plans and the affect new state mandates have on health insurance costs.

McKeague expects at least two proposals for mandates — one for mental health coverage, the other for contraceptives — to come forward in Lansing. Business advocates staunchly oppose health insurance mandates, saying they drive up the cost of health insurance for employers and employees.

Business groups worry that rising costs will lead to fewer employers offering health insurance benefits, McKeague said.

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