LANSING – With the Michigan House already passing a vehicle bill that would trim 15 percent off some of the credits awarded under the Michigan Business Tax, a House panel Wednesday heard competing ideas on what those credits signify.

Tax Policy Chair Rep. Kate Ebli (D-Monroe) opened up the hearing by saying that as the state struggles to fund key areas like schools and roads, lawmakers and the administration of Gov. Jennifer Granholm have to “come together for solutions.”

Both chambers of the Legislature have discussed the credits in question – compensation, investment, research and development, personal property taxes and brownfield projects – Ebli said, and that’s why the House Tax Policy Committee took them up.

The House passed HB 5384 earlier this month, which would reduce some of the credits.

Scott Schrager, legislative liaison for the Department of Treasury, told lawmakers that those credits and exemptions, totaling nearly $1 billion, are similar to state appropriations.

“A lot of the tax credits including the ones here, don’t really have anything to do with the theory of the tax,” he said. “One thing you’ll notice is there are a lot of credits and keep in mind that they resemble a government expenditure in that they shadow appropriations, and I’m not saying that’s bad. There are some reasons for doing things this way.”

With part of the MBT now tied into funding the School Aid Fund, Ebli asked whether reducing credits would benefit K-12 schools, which just received a $165 per-pupil cut (along with additional cuts to so-called 20j schools, see related story).

Schrager said since the School Aid contribution from the MBT is a fixed dollar amount, which is indexed each year, reducing the credits would not affect that contribution, but changing the exemptions could.

But business group officials who testified before lawmakers cautioned that the credits in question were crafted in order to make the tax burden more comparable to other states.

Ted Vogel, vice president and chief tax counsel for Consumers Energy, said keeping taxes low is important for the state in order to keep energy costs affordable.

Vogel said he took exception to Schrager’s statement about credits not being related to the tax, adding that when the MBT was crafted it was a “delicate balance” of assigning tax rates and credits that reflected the state’s wish to have more businesses invest in locating in Michigan.

But, “if a balance was struck in 2007, it wasn’t a perfect balance,” Vogel said, because utility property was left out of the credits for personal property.

Vogel said the Legislature should focus on restoring the uniformity that previously existed under the Single Business Tax, as well as raising the percentage of tax liability a company can use the credits against. He also urged lawmakers to make more credits available for use the following year if there is a year when the entire credit is not tapped.

And Brian Kandler, government relations director for the Detroit Regional Chamber, said lawmakers shouldn’t focus on reducing credits to “maintain status quo spending policies.

“One of the biggest credits is it gives people an incentive to locate in Michigan as opposed to those that just want to make sales in the state,” he said.

The chamber is focused on eliminating the MBT surcharge and has called for government reforms, particularly in the area of corrections, to make that happen, he said.

And Charlie Pryde, regional manager of government affairs for Ford Motor Company, said credits help Ford invest in research and development totaling $6 billion, most of which occurs in Michigan.

Ebli said the panel would hear more about the credits and what they mean from more groups next week.

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

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