Rush To Repeal SBT Leaves Question

August 14, 2006
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Grand Rapids Business Journal has consistently, frequently and vehemently supported repeal of Michigan’s Single Business Tax, and advocated thorough discussion of a “replacement tax” with thoughtful and creative consideration of business in a new millennium. The two are hinged together. The action of the legislature last week to repeal the SBT and the move to put the SBT repeal on the ballot for Michigan voters to decide are half-baked.

First and foremost, the loss of $2 billion in state revenue as a result of the repeal is certain to have grave consequences for local governments that are already suffering reductions in state revenue sharing and shutting down services.

Kentwood Mayor Richard Root, chairman of the Grand Valley Metro Council Legislative Committee, is among those questioning the legislature’s wisdom. Root recently predicted a “perfect storm” that would even more severely handicap local governments through the SBT repeal, the repeal of the personal property tax, and a bill usurping local authority (and funding) in a statewide franchising system for telecommunications and cable franchises.

In a letter to the editor in the March 20, 2006, edition of the Business Journal, State Rep. Jerry Kooiman, R-Grand Rapids, defended the legislature’s revenue sharing theft from local governments and wrote: “The bottom line is the state over the past few years has simply had less revenue to share — much of that due to the longer and deeper recession that Michigan has experienced compared to other states. … Much blame of local units of government has been placed on the state’s decision to reduce both the Single Business Tax and the Personal Income Tax. The bigger question is how much worse would Michigan’s economy have been if the Legislature and previous governor had not set those cuts in place?”

Poppycock.

The state has placed an undue and indefensible burden on local government and created hidden taxes on Michigan residents.

The Center for Michigan, the Grand Rapids Area Chamber of Commerce and several other business and economic think tanks have provided at least initial dialog in regard to the important and now immediate need for a replacement tax. Considerations include a gross receipts tax and extending the sales tax to services while concurrently reducing the state sales tax. It is important to analyze each proposal in regard to unintended consequences.

In cheering the legislative SBT repeal, the Grand Rapids Area Chamber of Commerce also suggested “the legislature take a serious look at trimming down government spending in conjunction with developing an alternative business tax.”

The Business Journal so, too, advocates that admonition.

The political maneuvering to kill the SBT and the manner in which it has been moved from ballot issue to legislature was among the best political chess games in recent memory. But the business community deserves better than good politics; it deserves good policy. The discussion must be deliberate, thoughtful and public, rather than left to a “silly season” of political posturing. That said, both gubernatorial candidates must make their preferences clear before Nov. 7.    

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