Many Republicans in the state Legislature ran on a promise to eliminate the 22-percent surcharge that’s built into the Michigan Business Tax (MBT), and they are working on fulfilling that aspect of their campaign pledges as several bills have been introduced in both chambers to either repeal or phase out that aspect of the tax that was created in 2007 to help replace the Single Business Tax.
The very first bill introduced in the state House of Representatives for the new legislative session — House Bill (HB) 4001 — calls for a repeal of the surcharge, while HB 4046 proposes a gradual reduction of the surcharge this year and in 2012, with the elimination of it slated for Oct. 1, 2012, the start of the state’s 2011-12 fiscal year.
HB 4046 would keep the surcharge at 21.99 percent through April 1. Tax liability incurred after March 31 of this year and before Oct. 1 would have a rate of 16.49 percent, while tax liability incurred after Sept. 30 and before Oct. 1, 2012 would be subject to a 10.99 percent surcharge.
Other House and Senate bills would do similar things.
Lakes area lawmakers are confident that they can wrangle the votes necessary to either repeal or phase out the surcharge, which has been a sticking point in the business community.
“It’s going to be on it’s way out,” said state Sen. Mike Kowall (R-Commerce, Highland, Milford, Walled Lake, Wixom, Wolverine Lake, White Lake, Orchard Lake, West Bloomfield).
The repeal of the surcharge would blow a $1.4-billion hole in a state budget that is already forecasted to be $1.8 billion in the red. Kowall said that he’s not saying a replacement has to be found for that $1.4 billion, but that there will be “a lot of footwork that has to be done” to get the budget in order if lawmakers don’t want to cobble together the funds to fill that hole.
When asked whether he preferred an outright repeal of the surcharge or he wants it phased out, Kowall said he wants it repealed.
State Rep. Eileen Kowall (R-White Lake, Highland) called the entirety of the Michigan Business Tax “a detriment” and said that the surcharge was inserted into the legislative deal struck in 2007 when the state faced another $1 billion-plus budget deficit that needed to be reconciled.
State Rep. Gail Haines (R-Waterford, West Bloomfield) said she isn’t backing a repeal or gradual elimination of the surcharge at this point — she just wants it gone.
“We’re still in the early stages of that,” she said, adding that the entire MBT needs “restructuring.”
“Now that Gov. (Rick) Snyder has called for this, we are taking it a lot more seriously,” she said, adding that she’s “optimistic” that the surcharge will soon go the way of the dinosaurs.
State Rep. Bill Rogers (R-Milford) said that the first bill he introduced in his legislative career called for a repeal of the surcharge, and he stands by such a move.
“Right now, what we really have to look at is what this entire tax structure is going to look like,” Rogers said.
Other legislation has been introduced relative to the MBT, including HB 4155, which would eliminate the tax in its entirety, and HB 4091, which would essentially implement Snyder’s call for turning the MBT into a 6-percent corporate income tax.
State Rep. Chuck Moss said he voted against the MBT when it was first pushed through the state Legislature in 2007, and he wants to “just kill it” now.
“It’s just a monstrosity and it’s been a job-killer,” he said. “The bottom line is (the surcharge) is an extra 22 percent on top of the rest (of a business’s tax liability). We are going to have to let it go and I would anticipate just making the cuts” to the state budget to make up for the shortfall that such a repeal would cause.
Haines said that, as of yet, she hasn’t determined how, if at all, she wants to see the SBT surcharge revenue replaced.
“There are several plans out there,” she said, and she is waiting for her colleagues to put forth viable options.
State Rep. Lisa Brown (D-West Bloomfield, Commerce, Wolverine Lake) couldn’t be reached for comment prior to press time.