New Michigan Business Tax riles businesses

January 11, 2009
| By Pete Daly |
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A new state business tax to replace the long-reviled Single Business Tax took effect at the start of 2008. Dubbed simply the Michigan Business Tax, it is now even more reviled than the SBT ever was in its 30 years on the books.

Ultimately, 29 amendments to the MBT were enacted during 2008 and there are scores more waiting for action by the Legislature, according to Ronald J. Kaley, a business tax expert.

One is a proposal to eliminate the "tax on a tax." Sales taxes collected by businesses are taxed under the law — even though that revenue goes straight to Lansing.

Another is a proposal to speed up the 10-year phase-out of the 22 percent surcharge that was tacked on to the business tax law at the 11th hour one year ago. That was done to bail the state out of a budget crisis.

The Michigan Business Tax is actually several different types of taxes rolled into one package. The MBT is described by Kaley as "out of control" and "the most complicated piece of state tax legislation in this country and maybe in the world."

Ed Kisskorni, another accounting professional with many years of experience in Michigan business taxation, called the MBT "an 800-pound gorilla." He said its complexity will definitely increase business for accounting firms hired to try to decipher it for businesses.

When it was rolled out, the MBT was intended to cut a break for large manufacturers in Michigan, which it did. But taxes for other types of business went up — reportedly as high as 600 percent in some cases for businesses in service industries.

The MBT is loaded with controversy, said Kaley, due to the many tax credits successfully driven by lobbyists, including some that are obviously written for the benefit of a single company, such as Meijer Inc., Spartan Stores and Michigan International Speedway near Jackson.

With businesses suffering in Michigan as it is, the MBT is a hot button issue in Lansing that cannot go away.

Jared Rodriguez, vice president of government affairs at the Grand Rapids Area Chamber of Commerce, said the MBT was in desperate need of an overhaul by the lame duck Legislature at the end of the year.

"The legislature missed an opportunity to establish a prudent and fair business tax with the MBT, and short of eliminating it completely, steps must be taken to at least upgrade it from horrible to terrible," said Rodriguez.

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