LANSING – A House committee studied several tax exemptions Monday with an eye on possibly eliminating some of them to help pay for a tax cut to all businesses.

House Republicans have said they would propose the elimination of $100 million in tax exemptions – they have not yet said which ones – to offset some of the revenue that would be lost under their plan to reduce the burden from the Single Business Tax. But Monday’s House Tax Policy Committee saw Republicans, who control the House, for the first time indicate which tax exemption eliminations they might support.

The committee also raised for consideration Democratic Gov. Jennifer Granholm’s proposed tax exemption eliminations for 2005 and the tax changes she recommended in 2003 that died in the Legislature.

Granholm has recommended eliminating $112 million in tax exemptions, but her proposal would use the new revenue to pay for programs such as K-12 schools in the 2005-06 fiscal year. Granholm’s Single Business Tax plan makes up for lost revenue through the application of the tax to more businesses and a new tax on insurers, not through the closure of tax exemptions.

During a lunch break, negotiators from the Granholm administration and both political parties in the House and Senate huddled to discuss possible compromises on a business tax plan. The lunch meeting failed to produce a deal, but the group was scheduled to meet again once the committee meeting concluded.

House Republicans had hoped to approve $100 million in tax exemption eliminations when the House convenes Wednesday during a session where they also expect to vote on their plan to reduce the SBT’s burden on business. But a House Republican spokesperson said the lack of progress made on tax exemptions Monday because the Department of Treasury opted not to participate in the committee meeting could complicate those plans.

Rep. Fulton Sheen (R-Plainwell), chair of the Tax Policy Committee, said the list of potential tax exemption eliminations presented at the committee meeting reflects Granholm’s proposals and the ones discussed at the workgroup negotiations.

House Republicans have developed a slate of tax exemptions they could support abolishing, but Mr. Sheen declined to name them, preferring instead to negotiate a proposal with the Granholm administration and legislative Democrats.

“That would be ideal, to have a bipartisan list,” he said.

If ending a tax exemption would eliminate jobs, then House Republicans would not support it, Sheen said in summarizing the test the House GOP is using on the tax exemption question.

At the close of the meeting, Sheen criticized the Department of Treasury for declining to participate in the hearing. “I’m disappointed that the Treasury ignored our requests and failed to be here,” he said. “I hope that the Treasury’s failure to be here today is not an indication of the road ahead.

House Republican spokesperson Matt Resch said the decision by Treasury not to testify hinders the readiness of the House to act Wednesday on business taxes. Resch noted that Granholm has repeatedly asked the Legislature to act on the issue.

Treasury spokesperson Terry Stanton said House Republicans wanted to negotiate through the workgroups, so that is the mechanism the department will use.

“Rep. Sheen is fully aware of the treasurer’s and the administration’s perspective on tax expenditures,” he said.

The debate on tax exemptions is part of a broader review of changing the state’s business taxes.

House Republicans have called for a Single Business Tax credit for manufacturers equal to 25 percent of their personal property tax burden with a 10 percent credit for all other businesses except utilities (HB 4972). The House GOP proposal also would change the SBT’s formula to base it 100 percent on sales (HB 4973).

The House GOP plan also would phase out the cost of providing health insurance as part of the way the SBT is calculated. It would reduce the SBT rate by 0.05 percent each year – if May revenue estimating conferences estimate that SBT revenue for the current fiscal year exceeds SBT revenue for the previous fiscal year by at least $80 million – from 1.9 percent to a minimum of 1.7 percent (HB 4922). The bill also would cut in half over five years the alternative business tax paid by those businesses below the threshold to pay the SBT.

Granholm proposed a plan that would cut the Single Business Tax rate to 1.2 percent from 1.9 percent, change the tax’s formula to base it 100 percent on sales, provide a Single Business Tax credit for manufacturers equal to 35 percent of their personal property tax burden, end some current credits like those for unincorporated companies and create a 2 percent tax on insurance companies’ premiums.

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