LANSING – Proposals to raise the cigarette tax and tax entertainment tickets are far less likely to be sources of new revenue than the elimination of tax exemptions and restricting of tax credits, sources said Friday.

News reports this week said Gov. Jennifer Granholm is proposing a 25-cent per pack increase in the cigarette tax and applying the 6 percent sales tax to tickets for sports and entertainment events.

However, sources said the Legislature is leaning against such concepts, instead preferring the elimination of tax exemptions, such as those on international calls and on products purchased from vending machines. There also is openness to curbing tax credits, such as the film tax credit that encourages producers to make their movies in Michigan and the Earned Income Tax Credit.

Another credit that one source said could be curbed is the increased tax credit that the Michigan International Speedway was given in 2007 for the 2008-12 tax years to help the facility with construction and renovations. This source said most of the work on revenues surrounded the closing of tax loopholes, not new taxes or increases in tax rates.

How Granholm officially wants to address the severe fall in revenues since she proposed her 2009-10 budget recommendation in February remains unclear since she has refused to comment.

On Thursday, Senate Republican spokesperson Matt Marsden said the caucus is open to discussing tax changes, but not general tax increases, and that the House would have to act first on any such measure.

In a response statement Friday, House Speaker Andy Dillon (D-Redford Twp.) said: “They made the same demand in 2007 and also dictated what was acceptable which led to the disastrous Michigan Business Tax surcharge that is hurting businesses across the state. Any budget solution is going to have to be worked in a bipartisan way and both chambers – including the State Senate – are going to have to shoulder responsibility, not just seek ways to avoid them.”

But Marsden dismissed the comment as “more typical Dillon rhetoric.” He said unlike the House, the Senate has passed budget bills that are balanced and that available revenues could support.

“We’re out there with what our proposal is, like it or not,” he said.

Further, Marsden criticized Dillon’s reference to the 2007 budget shutdown.

“Senator Bishop has spent the last month and a half candidly talking to the press about the errors of 2007 and wanting to avoid a repeat,” he said.

Meanwhile, Rich Studley, Michigan Chamber of Commerce president and CEO, said it’s time to stop floating proposals and actually make decisions. Still, Mr. Studley said he’s confident a balanced budget will get completed before the October 1 deadline.

Studley, speaking on Michigan Public Television’s “Off the Record,” also said he’s not convinced the tax proposals Granholm reportedly has put forward, which legislative leadership has not signed off on, are necessary to close the $2.8 billion combined general fund and School Aid Fund shortfall.

The Chamber and others have supported a bevy of government reforms totaling $2 billion in recent years, he said, and combined with a reduction in spending, that should be enough to close the deficit.

“If there is a gap it should be pretty small,” he said.

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