First enacted in the 1970s, the SBT was touted as a way to maintain steady state revenues. Eventually, the tax came under attack for many reasons, but business owners objected in particular to levies for each job and for the health insurance coverage that may have gone along with it. Former GOP Gov. John Engler supported an eventual phase-out over decades. In 2002, the governor and Legislature OK’d a tactic that ended the SBT at the end of 2009.
After some years of legislative and gubernatorial sparring, in early 2006, Republican Oakland County Administrator L. Brooks Patterson declared war on the long-reviled SBT. In his annual “State of the County” speech in February, Patterson announced he would launch a petition drive to put the death of the SBT on the November ballot. Dumping the SBT would promote job creation in Michigan, which is suffering from one of the highest unemployment rates in the U.S.
In March, the Legislature voted to repeal the tax. Democratic Gov. Jennifer Granholm vetoed the bill, noting that the Legislature had no plans to replace the revenue.
Then Patterson found an end-run around the governor. He presented the petitions directly to the Legislature, which by majority vote could approve the ballot question with immunity from gubernatorial veto.
On Aug. 9, 2006, the Legislature did just that. Granholm signed the bill the next day.
“Is there a risk in doing what we are doing today? Yes, there is a risk in doing what we are doing today,” reads a statement by Senate Majority Leader Ken Sikkema, R-Grandville, from Aug. 9. “… Ladies and gentleman, the greatest risk is doing nothing and saying we can wait because this is too hard. We need a catalyst for change and economic recovery and this is it.”
The SBT’s funeral now is set for Dec. 31 of this year, and it’s up to the politicians in Lansing to figure out what will follow. They have no lack of advice and input, from local and state Chambers of Commerce to Granholm’s November proposal, which they left in the air prior to the holiday break.
Granholm’s Michigan Business Tax proposal would:
**Cut the tax rate from 1.9 percent to 0.125 percent.
**Focus taxes on gross receipts, profits and assets.
**Exempt state school taxes on personal property.
**Raise taxes on insurance premiums from 1 percent to 1.25 percent.
**Retain the threshold of $350,000 in gross receipts before a business must pay the tax, but phase in businesses from $350,000 to $750,000.
In September, the Grand Rapids Chamber of Commerce proposed replacing the SBT with a 0.75-percent tax on gross profits. Businesses under $350,000 would pay a $150 fee. The personal property tax would be eliminated. The Chamber also proposed cuts in Medicaid and incentives for schools and local governments to save money by working together.