SBT Demise As Change Catalyst

August 18, 2006
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MUSKEGON — A Michigan Manufacturing Association official believes the state should use the elimination of the Single Business Tax as a springboard to evaluate all business taxes in Michigan

Chuck Hadden, MMA vice president of government affairs, made his remarks at the Muskegon Manufacturers Council Energy Users Group luncheon.

Hadden said the association suggests that Michigan should use the change to examine all business taxes, specifically the personal property tax. He said the association is also advocating that all businesses share in the tax burden and that the transition should be simple and orderly.

“Many businesses have built investment plans on economic development incentives offered in recent years,” the association’s business tax reform principles stated. “It is important that previously granted MEGA grants, brownfield redevelopment credits and other non-refundable tax credits continue in effect for those companies that have received them.”

With a year and a half left to determine what is going to replace the tax, Hadden said he hopes the system itself can be changed.

“Let’s change the system of collection,” he said. “Let’s find a better way to do it.”

Hadden said with the current system, 65 percent of the taxes are being paid by 4 percent of companies — specifically, manufacturing companies.

“We need to start something new in ’07 — that’s the law,” he said. But he hopes that the “something new” can benefit manufacturers.

Hadden also spoke of the energy issues that are affecting manufacturers, such as Public Act 141, which was passed in 2000 to restructure the utility rates, improve service and regulate the state’s utilities.

As for the question as to whether Public Act 141 is working, Hadden said the answer depends on who is being asked.

The act results in uncertainty for suppliers of electricity, which need to rely on customers to build infrastructure, while creating skewed rates for customers, with industrial customers subsidizing residential customers. Hadden said instead of causing residential customers to stay, the skewed rates are causing problems for the industries.

“Now we’re seeing the industry leave and the residents go with them,” he said.

Hadden said there are several choices with how to deal with the use of electricity in the state. Options range from regulating the system, modifying the regulating hybrid that is Public Act 141, or having a full open market for electricity.

Each option has its own perks and pitfalls, Hadden said. Regulated rate control gives certainty to the customers and also may get more plants built, while a modified hybrid system would need to continue to limit customer choices, balance rates and have reliability standards. Deregulation would affect prices and may show a change in quality, Hadden said.

“These are not easy questions to deal with,” he said. “I don’t expect this to be resolved right away.”

Hadden said in addition to determining how and if to regulate the use of electricity, diversifying energy sources also needs to be considered.

With the recent implementation of new technology, Hadden said he believes there soon will be more options, such as energy produced from agricultural waste.

“I think we’re on the cusp of something that is going to change a lot of things.”    

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