LANSING – As promised, the Republican-controlled Michigan Legislature passed an initiative Wednesday revoking the Single Business Tax two years early, on December 31, 2007 ? a move Standard & Poor’s said will give Michigan a negative credit rating.

Administration officials said Treasurer Robert Kleine was informed by the Wall Street rating firm that the vote to repeal the tax earlier than the initial 2009 date would not force a downgrading in the state’s credit rating – the rating used to set interest rates on the state’s debt – but will lead to a downgrade in the state’s outlook to negative. The outlook is used by investors to make decisions.

Neither of the other two major Wall Street rating firms – Moody’s Investors Services and Fitch Ratings – have apparently taken action following the vote Wednesday.

The negative outlook is a direct result of the SBT vote, said Liz Boyd, Governor Jennifer Granholm’s press secretary, adding, “Wall Street is signaling today’s action is a bad business decision.”

The SBT vote followed the initiative led by Oakland County Executive L. Brooks Patterson and garnered split votes from Democrats in the House and party-line votes in the Senate.

In the House, Democrats argued that lawmakers who could not bring themselves to vote against the initiative to at least abstain and allow an existing special joint committee formed to come up with a replacement tax work out a plan before the 40-day expiration, when the proposal would be placed before voters should the Legislature not have acted.

Democrats in the chamber eventually split their votes, with 36 opposing the initiative, seven lawmakers from competitive districts voting for it and six absent for the vote. It passed the chamber 64-36-7.

Dillon also said that if leaders were looking for boldness today, that they should eliminate the burden of the personal property tax on businesses instead. If the SBT repeal were to go into effect today, Dillon said, businesses would still be taxed 18 percent for personal property in Michigan, while nationally the average is 13 percent.

“(What) we’re (saying is we’re) going to keep sticking you with the personal property tax because we have a budget hole we need to fill,” he said.

And looking to November, Dillon said, “How smart are we going to look when the SOS (Stop Overspending) and K-16 passes and we’ve wiped off the SBT?”

Rep. Steve Bieda (D-Warren), reading off a list of services provided by the state, said that those were being put into jeopardy by this vote. “I think the citizens know what this means – hold onto your wallets.”

But DeRoche challenged Democrats that a vote in abstention was essentially a vote to support the status quo.

“There is no vote more important that we have taken during this session than this,” he said. “We’ve had nobody step forward with an answer to a simple question, ‘Where are we going?'”

DeRoche said that college graduates and others are voting with their feet and that being the leader in moving van rentals and mortgage foreclosures was not the direction the state should be heading.

Rep. Fulton Sheen (R-Plainwell) said that in traveling across the nation, he has found that no state is hurting as bad economically as is Michigan. “Almost every state around us has restructured,” he said. “What good is a skilled labor force if they are unemployed?”

While DeRoche said he respected Dillon’s 30-day request for a proposal, DeRoche said he couldn’t commit to that since he has seen no such commitment from the executive office in working out a plan.

“We need to build a consensus,” he said, adding that the rhetoric on services being attacked doesn’t stand up, as it has been the governor who has repeatedly cut back revenue sharing and spending on K-12 and higher education. “They don’t have credibility to say those services are under attack. Those services are under attack when I go into a budget negotiation.”

In the Senate, Senate Majority Leader Ken Sikkema (R-Wyoming) threw the accusation that the Legislature was acting irresponsibly back in the Democrats’ faces, saying if Gov. Jennifer Granholm had not vetoed three SBT related proposals the Legislature would not be voting on the measure.

If Granholm had not vetoed a proposal to exempt the SBT being paid on new employees, or had not vetoed a proposal to exempt new businesses from paying the SBT for five years, or had not vetoed a proposal to remove health insurance costs from the tax base, then the accelerated repeal would not be needed.

Both he and Sen. Alan Cropsey (R-DeWitt) also said the action on Thursday was not unprecedented, referring to the Senate’s action in July 1993 when it voted to eliminate all property taxes for education, the vote that led eventually to the adoption of the Proposal A school finance reform.

That vote, spearheaded by then state Sen. Debbie Stabenow (D-Lansing), was taken without a replacement revenue source in place, Sikkema said. It was done because officials knew unless they were forced to make changes, they would not.

And Cropsey said since only a relative handful of legislators helped craft the Proposal A compromise and all but one will be gone after the November election, it was critical that the Legislature act so it could just as quickly begin to work on a solution while it had the benefit of those lawmakers.

Cropsey also said it made sense to repeal the tax since the state offered tax breaks to companies to attract them to the state.

But Senate Minority Leader Bob Emerson (D-Flint) there are more provisions in the proposal to which lawmakers have been unwilling to pay attention, dealing with cuts to county appropriations, for example. That simply adds difficulties on future Legislatures to keep the state’s budget balanced, he said.

And Sen. Ray Basham (D-Taylor) said of the proposal: “If it looks like an election year gimmick and it smells like an election year gimmick, it is an election year gimmick.”

Boyd again reiterated that it is Granholm who has put a plan to reduce the SBT burden on the table – one that’s been there since January 2005, as Republicans have said it unfairly targets some industries over others.

The Legislature has had since 1999 to come up with a plan, Boyd said, adding that no one but the governor has provided a substantial plan since that time.

On the vote, she said, “It’s unfortunate they think they need to hold a gun to their head to do the job they were elected to do.”

Boyd said she did not know what the speaker expected more out of the executive office and that there was no way the governor would sign off on benchmarking models, referring to the Speaker’s study released this week, that ally Michigan with several states that have higher income and sales taxes, as well as lower per-capita incomes for the residents.

She added that residents should ask their lawmakers what they plan to do to cover needed services or what would be cut and that they should demand an answer by Election Day.

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