LANSING – As lawmakers finished their session past midnight Tuesday, Gov. Jennifer Granholm announced she would sign the package of Single Business Tax cuts enacted earlier ? the final proposal is expected to cost $575 million over four years.
With her intent to sign the package, 2005 will end with one of the top legislative priorities accomplished, if in reduced form. The year began with Granholm proposing a total restructuring of the tax that included loophole closings and an increase in the insurance tax to help pay for her proposal, which was estimated at more than $1 billion.
Though last week she had warned a tax cut may not be possible if Congress passes massive budget cuts that would affect the state’s human services programs, Granholm signaled earlier on Tuesday that she would sign the package.
“There is no question that we must fight to keep the manufacturing jobs we have in Michigan,?? Granholm said. ?Just as we have demonstrated a commitment to diversifying our economy by creating tens of thousands of jobs that can’t be outsourced, tonight we are sending the signal that manufacturing has a place in Michigan’s future, too.”
Granholm made her announcement even as legislators were urging her to sign the bills. Senate Majority Leader Ken Sikkema (R-Wyoming) said signing the bills would send “a clear message that Michigan means business.”
And Sen. Nancy Cassis (R-Novi), who has been one of the governor’s most outspoken critics, said it would be a “vital step” towards helping manufacturing.
House Speaker Craig DeRoche (R-Novi) said the business tax cuts are an important first step toward bringing relief to Michigan manufacturers. He also urged the governor to sign the legislation.
“The result was worth the effort,” he said.
House Minority Leader Dianne Byrum (D-Onondaga) said the legislation would push for new investment in the state and provide good-paying jobs to workers in Michigan.
“If we want to remain a global manufacturing leader, then we need to do our part to help our manufacturers thrive,” she said. “These tax cuts will ensure Michigan is a desirable place to do business.”
While this package has been completed, Republicans have promised they would move forward with more SBT bills in 2006.
Many elements of this package were bills adopted last month as part of the SBT agreement announced on November 4 that quickly fell apart over disagreements over whether a repeal of the 2009 sunset on the SBT was included.
Granholm spokesperson Liz Boyd said the governor was optimistic in getting bipartisan agreement to move the tax package “a small step further. The governor is trying to get an enhancement on the table and go beyond what has been approved by the House and Senate.”
As for decisions in Washington regarding Medicaid changes that would cut aid to the state, Boyd said it is unlikely the governor will know any fiscal impact by the time she has to make a decision on the tax package. “We’ll have to make a decision on the package with the information we have on hand,” she said. “If massive cuts are not handed down, I don’t see that affecting the governor’s decision.
The agreement should mean overall tax savings to businesses in the state of $575 million over four years, about $75 million more than the initial proposal announced last month by Senate Majority Leader Ken Sikkema (R-Wyoming) and DeRoche.
Under the proposal, companies would get an SBT credit of 15 percent on the personal property tax they pay.
Companies that locate jobs in the state would also be able to take a 100 percent credit on the personal property taxes paid to move those jobs into the state. While any company can employ the credit, it is seen largely as a way of convincing Delphi Corporation to concentrate operations in the state. Delphi declared Chapter 11 bankruptcy protection in October.
However, that provision was also amended to allow General Motors Corporation and Ford Motor Company to use the credit, even though they are likely to reduce the number of jobs in the state.
Also part of the package is an extension of a current tax credit for Delphi and Visteon Corporation, although that was changed to specify that the credit applied to products produced and sold out their Michigan plants.
The change in the apportionment would amend the current formula of basing the SBT on 90 percent sales, 5 percent wage base and 5 percent property to 95 percent sales by 2008. The apportionment would be changed to 92.5 percent sales in 2006 and then jump to 95 percent sales in 2008.
Granholm had originally called for the apportionment to be increased to 100 percent sales when she proposed the tax changes last winter.
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