LANSING – As expected, Gov. Jennifer Granholm proposed Thursday morning expanding the sales tax to services, reducing the sales tax rate to 5.5 percent and phasing out the Michigan Business Tax surcharge by 2012 as part of her 2010-11 fiscal year budget recommendation.
“Our tax system has not kept pace with these economic changes and must be reformed in order to recognize consumer activity that is more reflective of a diverse and global economy,” a budget document from the governor’s office says.
The budget proposal contains $8.9 billion in general fund spending and $12.86 billion for the School Aid Fund. The new revenue from the services tax would initially go to the School Aid Fund to prevent cuts to K-12 schools with the money eventually going to pay for the MBT surcharge phaseout.
The governor called for reducing the MBT’s gross receipts tax rate from 0.8 percent to 0.6 percent.
The budget also assumes $722 million for three quarters of federal recovery assistance through an increase in the federal Medicaid matching rate.
And as Granholm had said in her State of the State address, she called for the return of the Michigan Promise Scholarship for those who complete their degree and work for one year in Michigan.
The budget cuts $140 million from the Corrections budget through reducing the prisoner population and closure of up to five more facilities.
It also, as expected, calls for a tax on physicians to raise money for Medicaid.
Once again, Granholm called for the elimination of the Tuition Grant scholarship program for students at private colleges.
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