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MMA Sees Tech Gains From MBT
LANSING — Michigan manufacturers will find it more affordable to make technological upgrades starting next year. The new Michigan Business Tax goes into effect on Jan. 1 and the levy, which replaces the Single Business Tax, offers product makers a hefty reduction on personal property.
That element of the MBT is the one that pleases the Michigan Manufacturers Association the most. The Lansing-based manufacturing advocate, with nearly 3,000 members, testified last spring in legislative hearings held on the business tax, and lobbied lawmakers and Gov. Jennifer Granholm to reduce the personal property tax.
“We think it’s a good compromise and a good plan for manufacturers. I think it takes a real step forward in looking at all business taxes, rather than just looking at the elimination of the Single Business Tax. We also did work to help manufacturers with their personal property tax burden,” said Chuck Hadden, Michigan Manufacturers Association vice president of government affairs.
“I think the credit for the personal property tax, which will end up being about a 60 percent credit on the personal property tax that is paid, is significant for manufacturers,” he added.
Hadden said manufacturers have paid an inequitable portion of the state’s business tax and a too-high personal property tax rate for years because of how those taxes developed over time. He said that combination has led to machinery and equipment being over-valued in Michigan, especially when those values are compared to other places.
“We’ve been paying an inequitable share, and I think this has started to level the playing field,” he said of the Michigan Business Tax.
Hadden said the new tax is just as good for small auto-parts suppliers as it is for Detroit automakers.
“Absolutely. They’re going to get that same personal property tax credit. They’re going to get that same credit for the personnel they hire and the benefits they offer,” he said.
“I think those are the things that are going to help them.”
The Michigan Manufacturers Association also likes other components of the MBT. And not just for manufacturers, but for the overall future of the state’s economy.
“The other thing that I think is significant for the state and economic development in the state are the credits for the benefits for the hiring of the people you have and the credits for the investment you make in the state, as well as the credits for research and development,” said Hadden.
“I think those are all key to the state.”
The T’s still have to be crossed and the I’s have to be dotted in the MBT yet, so a trailer bill is coming this fall. But Hadden said he didn’t think the trailer would contain anything of much significance.
Hadden testified at the tax hearing in May and said he told lawmakers that if they were really going to work on a business tax, they couldn’t just look at the SBT. He said they also had to put the personal property tax into their calculation.
“Because if they want people to invest in the state and make that investment in new equipment, they needed to look at personal property taxes. Every time you buy new equipment, you increase your tax in the state, and you need to find a way to lighten that burden for manufacturers so they can continue to invest in the state.”
Hadden said the Michigan Manufacturers Association wants to see the personal property tax eliminated for all business sectors someday because the organization believes the levy stifles growth and makes it tougher for Michigan companies to compete.
But Hadden also said erasing the tax from the state tax rolls won’t be an easy task.
“The problem with that — and I’ll be quite frank about this — is the majority of that tax goes to local units of government. We’ve got to find a way to replace that for them, or we will have a real problem,” he said.
Although the Michigan Manufacturers Association feels the MBT will help existing manufacturers in the state expand and entice some new entries into the field, Hadden wasn’t as certain that the tax would lure out-of-state companies to Michigan.
“Attracting businesses is a whole other game, and I think a lot of factors go into it,” he said.
“But tax is one of those, and I think we’ve made significant steps in improving our tax structure.”