LANSING – A plan by Michigan Senate Republicans to create $300 million in new revenue for the current fiscal year in exchange for phasing out the surcharge on the Michigan Business Tax will add to the state’s structural deficit in the long run, said Craig Thiel with the Citizens Research Council.

The proposal calls for delaying a scheduled increase in the Earned Income Tax Credit and curbing the state’s film production tax credit.

The plan (HB 4514 , SB 838 ) brings in less than the surcharge it is intended to replace, Thiel said, and that will be compounded in 2012, the last year of the surcharge, with scheduled reductions in the income tax rate.

“It’s really intended to raise revenues in a net increase in one year only,” Thiel said. “That’s to satisfy a cut in the school aid budget that wasn’t palatable.”

Assuming flat revenue from the new source, which Thiel said is a reasonable expectation, the state would be short $200 million in 2012 on top of any losses from the income tax rate cut.

“You basically made the problem worse,” he said of the plan.

Attention now shifts to the House and Senate deciding on which revenues to pursue to fund spending priorities. And for now, neither side is embracing the other’s ideas.

The House has passed a tax on physicians, canceled a scheduled increase in the personal exemption for the income tax and reducing yet to be specified Michigan Business Tax credits. Majority Republicans in the Senate have resisted those plans.

House Speaker Andy Dillon (D-Redford Twp.) did not comment early Friday morning about the Senate revenue plan, but expressed concern about it in a statement later in the day.

“I am relieved that the Senate has finely put a proposal on the table, but also very concerned that their plan seems to hit the very tax credits that are creating jobs in Michigan,” Dillon said. “While we’re still reviewing the Senate’s proposal, I’m not sure there is an appetite in the House for cutting incentives that create jobs. The House believes taxing tobacco more fairly and closing corporate loopholes would be better ways to protect education, police and fire and other essential programs than ending rewards for companies that invest in Michigan and create jobs for our workers.”

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