November 29, 2006
Michigan Business Tax plan is fair, simple and stable
LANSING - Governor Jennifer M. Granholm today unveiled details of the Michigan Business Tax (MBT), her new plan to replace the out-going Single Business Tax (SBT), making the state's business climate more competitive and ensuring that funding will be available for critical programs including public education, health care, and public safety. The plan is built on the principles Granholm has outlined this year: a tax that is revenue neutral with a low rate and broad base that doesn't tax payroll or health care.
Under the Governor's proposal, 77 percent of businesses will pay less taxes, and funding for critical programs citizens depend upon will be protected. In addition, the plan provides a $150 million tax cut to Michigan businesses.
"The Michigan Business Tax is win-win. It's a competitive, pro-growth tax that will benefit more than three-fourths of businesses while protecting funding for critical programs like health care, public education, and public safety and providing a tax cut for Michigan businesses," Granholm said.
The MBT is based on the following principles:
- Create a business tax with the broadest base and the lowest tax rate possible
The MBT has three components in the base: gross receipts, assets which will be taxed at 0.125 percent and business income which will be taxed at 1.875 percent. These rates are among the lowest in the nation and well below the current SBT rate.
- Benefit Most Businesses
The apportionment formula under the MBT is based 100 percent on a firm's percentage of Michigan sales, compared to the current SBT which is based 92.5 percent on sales and 3.75 percent each on the percentage of payroll and property. Michigan businesses will receive a $150 million tax cut.
77 percent of Michigan businesses will pay less under the MBT - a higher percentage of winners than under any current public plan.
- Provide substantial personal property tax relief to industrial and commercial taxpayers
Industrial and commercial businesses receive a 46 percent personal property tax cut
- Eliminate the tax on payroll, benefits, and health care
Wages and benefits, including health care are not part of MBT's base.
- Ensure revenue neutrality to protect citizens from higher taxes or huge cuts in education, health care, or public safety The MBT raises the same amount of revenue as the current tax to protect education, health care, and public safety from devastating cuts while preserving the $600 million in tax cuts that start taking effect this year.
- Help Small Businesses
Businesses with less than $350,000 in gross receipts are not subject to taxation. The MBT is phased in for companies with gross receipts between $350,000 and $700,000 to eliminate the "cliff" effect in the current law. Small businesses may also choose to pay an alternative tax of 1.8 percent of adjusted business income.
- Help High Tech Companies
Technology companies that form the heart of the Governor's 21st Century Jobs Fund will receive a $125 million tax cut. Five of every six companies in these sectors will benefit. In addition, the MBT creates a new MEGA credit to encourage research and development innovation in Michigan.
- Protect Economic Development Tools
MBT retains the current MEGA compensation credit as well as the MEGA credit for high tech jobs, brownfield tax credits, historic preservation credits, and Renaissance Zones.
After presenting her new Michigan Business Tax, Granholm encouraged legislators to take up the legislation before they adjourn at the end of the year.
"For nearly two years, the Legislature has claimed tax reform as one of its top priorities," said Granholm. "These leaders have a chance to make a true difference in Michigan's future by creating a competitive tax climate that encourages businesses to locate and helps them thrive here. But they must act."
Legislation to implement the MBT will be introduced in both legislative chambers today. Sponsors are expected to be Senator Bob Emerson (D-Flint) and Representative Dianne Byrum (D-Onondaga).
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