LANSING – The first bill introduced and passed by a legislative chamber in the 95th Legislature is a tax cut, as the Senate on Thursday gave 25-11 approval to SB 1 phasing out the nearly 22 percent surcharge on the Michigan Business Tax.

The measure passed after Senate members debated the proposal for more than an hour, a debate characterized as summarizing the basic arguments of how the two parties would restore the state’s economy.

Republicans argued that in the crisis now confronting the state, businesses are facing life and death decisions and cutting the surcharge would provide both hope and tangible benefits. Democrats retorted that cutting the tax would help plunge the state into a deeper budgetary hole while reverting to what they said was the proven failure of tax cuts to stimulate economic development.

Sen. Glenn Anderson (D-Westland), Sen. Jim Barcia (D-Bay City), Sen. Tupac Hunter (D-Detroit), Sen. Hansen Clarke (D-Detroit) and Minority Floor Leader Buzz Thomas (D-Detroit) joined the solid Republican caucus in supporting the measure (Sen. Ron Jelinek (R-Three Oaks) was absent as his wife was hospitalized).

The legislation is similar to a bill passed by the Senate last fall, which died in the House, except that it would phase the surcharge out in two years starting first with the surcharge being cut by half in 2009 and then ending in 2010.

The Senate Fiscal Agency estimates the bill would cut revenues by at least $166.1 million in the 2008-09 fiscal year, a figure that would grow to $457.5 million in 2009-10 and then $593.4 million in 2010-11.

“What has happened to all my fiscal conservative friends on the other side of the aisle,” asked Sen. Michael Switalski (D-Roseville).

“Whatever happened to my friends on the other side of the aisle who used to care about working men and women,” replied Sen. Jud Gilbert (R-Algonac).

Helping businesses will help preserve jobs in the state, Republicans argued. “Jobs. That is the Michigan issue. It has been the Michigan issue all century,” said Sen. Roger Kahn (R-Saginaw Twp.).

Sen. Bill Hardiman (R-Kentwood) said many members of the Legislature didn’t appear to understand “the pressure cooker that is out there” facing business owners and their workers. “We’re in a downward spiral and we have to stop it and we have to stop it now,” he said.

Sen. Gretchen Whitmer (D-East Lansing) said Democrats do want to help business and do want to eliminate the surcharge, but eliminating cannot be done at the cost of hurting others. Republicans helped enact the surcharge, she said, and “you negotiated this surcharge because you, like us, couldn’t stomach the cuts we would face to healthcare, education and other services.”

She also warned she would not support any effort to help pay for the surcharge’s elimination by trying to end the earned income tax credit that has been established for the poor.

Sen. Gilda Jacobs (D-Huntington Woods) argued that any changes to the surcharge or the MBT should be part of an overall review of taxes. Tax cuts themselves will not change the state’s economy, she argued, since 32 tax cuts were enacted during the 1990s and they did not stop the economy in the state from going into the tank.

But Senate Majority Leader Mike Bishop (R-Rochester) said state leaders had to “get out of their comfort zone” if they were to have any effect in revitalizing the economy. “We now, more than ever, have got to change,” he said.

Before the chamber tackled the bill, it defeated, on a straight party-line vote, a Democratic amendment to tie-bar the bill to three bills that would impose a moratorium on home foreclosures. Mr. Thomas and Mr. Clarke both argued that to restore the economy the state had to take steps to help both businesses and homeowners.

How the bill will be received and dealt with in the House is uncertain since Speaker Andy Dillon (D-Redford Twp.) has called for an overview of the state’s tax structure.

Late Thursday Dillon issued a statement saying any changes to the surcharge have to be done in the context of a comprehensive change to the state’s tax structure.

“With the state already facing a projected budget shortfall of $1.4 billion for this year and the next, we must move forward with comprehensive tax reforms that won’t impede our economic recovery. Additionally, I am adamant that property tax relief for homeowners also must be a part of tax reform in Michigan. The action we take must leave our businesses, working families and state in a strong position as we work to rebuild our economy and get our Michigan back on track,” Mr. Dillon said.

And spokespersons for Governor Jennifer Granholm have said she would favor eliminating the surcharge so long as it is paid for in some manner.

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

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