Michigan Lawmakers Vote To Scrap Business Tax

by Mike Godfrey, Tax-News.com, Washington

14 August 2006

Michigan's state legislature has voted to approve abolition of the state business tax from the start of 2008 in a bid to boost investment and job creation.

Under the bill, the Single Business Tax, a kind of value-added tax which generates $1.9 billion annually in revenues for the state, will cease to exist from December 31, 2007.

House Speaker Craig DeRoche, a Republican, said that the elimination of the tax was part of a broader plan to reform the state's tax structure in an attempt to make it more appealing to business.

"Michigan is struggling, people are losing their jobs and thousands of college grads are leaving our state. Reforming our business tax system is not only the right thing, it is the necessary thing to move our state in a new direction and bring jobs back to Michigan," he said in a statement.

Citing a report by the Anderson Economic Group, state GOP say that Michigan's key business taxes are out of step with competing states. The report specifically cited the Single Business Tax as the only state value-added tax in the United States.

Earlier this summer, Speaker DeRoche and Senate Majority Leader Sikkema named a joint House and Senate committee to develop a new business tax for Michigan. The committee is scheduled to report back to the legislative leaders by Dec. 1, 2006.

Governor Jennifer Granholm, a Democrat, has cautioned that getting rid of the tax will jeopardise key services such as education. However, since the vote came about as a result of a petition, the governor has no power of veto over the repeal.

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