MBT Needs Fixing

July 13, 2007
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GRAND RAPIDS — The good news is those who work in economic development now have a tool they can use to draw companies and jobs to West Michigan. The bad news is the Michigan Business Tax is full of unworkable elements, and now that Gov. Jennifer Granholm has signed it, another bill will be needed to make the necessary corrections.

"A lot of things need to be changed. They need a 'trailer' bill," said Don Stypula, Grand Valley Metro Council executive director.

Stypula explained that the MBT is being put through a line-by-line analysis because a lot of the normal detailed work that is part of most legislation didn't happen with the business tax, which is actually a package of four House bills and one that originated in the Senate. Two of the House bills exempt the personal property tax, and Stypula said that issue is the one that will likely need the most clarification.

Another change could come to the MBT's underlying value-added concept, which means that every step a product or service goes through adds value to it and results in a higher tax for that service or product. The Michigan Chamber of Commerce reportedly opposes the concept, as does the state's insurance industry.

"They get clobbered under the bill," said Stypula of insurers.

Stypula said a trailer bill would be coming along shortly, and the MBT would get a two-year-or-so trial run before Lansing reviews it.

"All in all, I think it's good news," he said of the fact that the state has a business tax finally in place.

The Michigan Historic Preservation Network also thinks the MBT is good news because lawmakers preserved the state's Rehabilitation Tax Credit in the tax. MHPN lobbied heavily for the RTC's inclusion, as it's a key incentive for the rehabilitation of historic downtowns.

MHPN reported the RTC has generated an economic impact of just under $2 billion from 2001 to 2006 and created 22,000 new jobs over that time frame. The agency pointed out $11 are invested for every $1 of tax credit that is awarded

As for the FY08 general budget, Stypula said he doesn't expect lawmakers will complete it until the early morning of Sept. 30, just a few hours before the new fiscal year begins Oct. 1. He said some cuts and new taxes will be part of the new spending plan that is facing a $1.8 billion deficit. But exactly where a tax hike will come from isn't certain because the idea of extending the 6 percent sales tax to tickets for sporting events, concerts, movies, live shows and other "luxuries," such as a round of golf, is running out of steam.

"The idea of taxing tickets is starting to lose ground," said Stypula of what some lawmakers have dubbed a "luxury tax."

Stypula said intense lobbying pressure from Detroit's professional sports teams has led the fight against that tax. Other cities, such as Grand Rapids, have also voiced concern over the tax. Stypula felt most of the increase will come from the personal income tax, which may rise from the current 3.9 percent to the old rate of 4.6 percent.

Stypula also noted that one group has promised to start a recall drive for any legislator who votes for any tax hike, personal or otherwise.

Metro Council members approved the FY2008-2011 Transportation Improvement Program last week. The four-year program should support about $90 million worth of projects in the region each year, if federal transportation funding isn't used for other items.

GVMC Transportation Director Abed Itani said the federal government distributed 97 percent of the allocated transportation dollars in previous years. But since 2002, he said the annual allocation has fallen to 87 percent.

"Those estimates in the later years may come down," said Itani of the four-year program. "Congress is taking transportation money to pay for the Iraq war and other things."     

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