LANSING ? Gov. Jennifer Granholm needs ironclad support from her fellow Democrats in the Legislature to pass her plan changing the way the state taxes its businesses, but some of the party’s legislators from Detroit are uncommitted because of its potential impact on insurance rates in the city.

Granholm’s plan would cut the SBT rate from 1.9 percent to 1.2 percent, change the tax’s formula to base it 100 percent on sales, provide a credit to manufacturers on personal property taxes paid, end some current credits like those for unincorporated companies and create a 2 percent tax on insurance companies’ premiums (SB 295, SB 296, HB 4476, HB 4477). The administration says the plan would reduce taxes for 76 percent of businesses that pay the SBT and especially aid struggling manufacturers.

It is the impact of the increased tax on insurers that has caused some Detroit Democrats to remain on the sidelines. Insurance industry leaders have said the tax increase would force insurance companies to raise their premiums. In Detroit, where sky-high insurance rates are a hot-button issue, some Detroit Democrats say the bill’s potential causing of an insurance rate hike is unacceptable.

Opinion among the Detroit delegation is mixed. Nine of the city’s 16 Detroit Democrats in the Legislature have co-sponsored the plan to overhaul the Single Business Tax. But Granholm probably must have solid Democratic backing of her plan for it to pass.

“I want to help the governor out because it helps some good friends of Michigan, but it’s a hard sell in my district,” said Rep. Virgil Smith III (D-Detroit), with the “good friends” remark a reference to how the plan would aid manufacturers.

Smith said a constituent recently yelled at him “like a mother to a child” over the cost of insurance in the city. Granholm has a “great plan” to redo the Single Business Tax, but something must be done on insurance, he said.

Rep. Marsha Cheeks (D-Detroit) said she is undecided on the SBT plan because of the question of its impact on insurance rates, which she said are “ridiculous” in Detroit. Cheeks said her homeowner’s insurance costs more than $5,000 a year.

“If there’s any way that our insurance rates will be increased, we can’t support it,” she said.

At this point, the Granholm administration has not applied much pressure to Cheeks to win her support, she said. “I imagine that’s coming though,” she said.

And Rep. LaMar Lemmons III (D-Detroit) said he would remain “on the fence until the insurance issue is resolved,” calling for linking the SBT bills to legislation reducing insurance rates in Detroit. He said he expected insurers would raise rates – and do so disproportionately in Detroit – if the plan becomes law.

But the nine sponsors of the legislation say the insurance industry’s threat of a rate hike because of the tax increase lacks credibility. Rates are high in Detroit even with what insurers acknowledge is a favorable tax climate in Michigan, they say.

The nine Detroit Democrats sponsoring the legislation are Sen. Irma Clark-Coleman, Sen. Hansen Clarke, Rep. Morris Hood III, Rep. Tupac Hunter, Sen. Burton Leland, Sen. Buzz Thomas, Rep. Steve Tobocman and Rep. Mary Waters.

Thomas, the main Senate sponsor, said Detroit Democrats need only examine the insurance industry’s record with rates in the city to know that the tax increase in the plan will have little or no connection to rates.

“They’re already a very undertaxed industry, and they’re certainly not passing those savings on to the consumers,” he said. “I would hope that my colleagues would not be seduced by crocodile tears.”

Still, Thomas said it is too early to worry about the lack of a unified Democratic front. Republicans, who control both houses of the Legislature, have yet to decide what, if anything, will be voted upon with the SBT issue, he said.

Hunter said he supports Ms. Granholm’s plan because it would “undoubtedly have a huge, positive impact on the manufacturing sector.” And he called insurers’ warning of a rate hike hollow. Rates already are high in the city.

“I am not going to cower to that threat in any way,” he said.

Democrats will line up eventually behind Granholm’s plan, Hunter said. “Because it’s the governor’s proposal, and we’re going into an election year, and this is a key part of her economic agenda, I think Democrats will be hard-pressed not to support it,” he said.

This story was provided by Gongwer News Service. To subscribe, click on Gongwer.Com