Candidates Need Plan To Replace SBT

September 5, 2006
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There's a new campaign issue in Michigan, or at least there should be. Now that legislators finally — finally — have repealed the Single Business Tax, the state must decide what "replacement taxes" to institute, fair business taxes that will relieve the onerous burden that has been placed on local governments.

Voters should watch carefully to see which politicians — including the gubernatorial candidates — have the leadership to address this issue in detail. Before Nov. 7.

It won't be the legislature collectively. It took all their pre-election "courage" to vote for the repeal; they set up a special tax committee to come up with replacement recommendations … by Dec. 1.

When? Three weeks after the election, that's when. And that's no kind of coincidence.

The Grand Rapids Business Journal has consistently supported repeal of the SBT, but also advocated thorough discussion of how to replace the $2 billion loss in state revenue.

This is now clearly a key issue, despite the release of a recent study that contends the SBT has not been the main culprit in the state's slow economic growth. (See the story on page 3.)

That study lays the state's economic doldrums squarely at the door of the Big Three automakers, and ranks Michigan as better than the national average in terms of business taxes.

Our continued overdependence on the auto industry is an old but true story, and incredibly complicated to address, requiring years of investment in the life sciences, education and technology.

But the SBT has played a role, discouraging business hiring and investments. While the "tax structure" now has been generally dismissed by job creators in two studies this year in terms of business recruitment to Michigan, the SBT has been an especially vile and deservedly hated tax by Michigan small businesses. New taxes can be structured more favorably; possibilities might include a gross receipts tax and extending the sales tax to services while concurrently reducing the state sales tax. But citizens need to know how — and how much.

Gov. Jennifer Granholm and challenger Dick DeVos agree that most of the $2 billion in SBT revenue must be replaced, since it funds health care for the poor, prisons, state aid to universities and revenue-sharing for municipalities. As one would expect from their party affiliations, Democrat Granholm contends the entire $2 billion needs to be replaced, while Republican DeVos has said cuts can offset some of it.

But neither has presented a detailed plan … yet.

Some might argue that because the SBT doesn't expire until Dec. 31, 2007, a plan doesn't need to be in place now. That's the legislature's tack: We don't know what we want, but we know what we don't want, so we'll get rid of that and figure it all out later. The longer things go, the more likely there will be a $2 billion hole in the budget.

Besides, this is a campaign issue. "Elect me and I'll figure it out" displays no leadership whatsoever.

The candidate who can come up with a viable plan to replace the SBT is going to garner a plethora of votes. Sure, any plan will be criticized in some quarters. But it would surely be preferable to what the state has now: no plan at all!    

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