LANSING ? Michigan Senate Republicans powered through their version of a $1 billion Single Business Tax cut Tuesday, sending their plan that would tie future tax cuts to increases in state revenue to the Michigan House.
Senate Majority Leader Ken Sikkema (R-Wyoming) called passage of the package a major step forward and a good sign that a tax proposal and a final version of the tobacco settlement securitization ? and with it $1 billion to fund Michigan technology start ups ? can go to Gov. Jennifer Granholm by November 11.
But Sikkema and his caucus appear now to be the only people happy with the tax plan. Granholm’s spokesperson said the proposal is dead if it comes to her desk, and business groups have been tepid in their response to the plan.
With the passage of the package, both houses of the Legislature have gone on record approving some form of business tax cuts, though in each case the cuts were passed mostly with Republicans support.
Now sent to the House, it is still uncertain what the final form a tax cut proposal will take, and whether it will be tied to the tobacco settlement securitization issue that will be put into conference committee.
The other question is when a tax cut may take effect. The Senate failed to move many of the House-originated bills in the package.
Sikkema told reporters after the meeting his only a criterion for a final tax plan is that it include an overall business tax cut.
Senate Democrats charged that the package would not do enough to help the manufacturing industry in Michigan.
“This package gives a tax cut to every fast food chain at the expense of every manufacturer who needs a lot but gets a little,” said Senate Minority Floor Leader Sen. Mark Schauer (D-Battle Creek).
And they objected to the additional revenue limit that would be added onto state government when the Headlee tax limit amendment in the state constitution.
Sen. Michael Switalski (D-Roseville) said the state is already $5 billion below the Headlee limit and the government has gone from being efficient and effective in delivering services to being forced to borrow money.
The vision behind the plan is “an empty vision,” Switalski said. “Now that we have starved state revenues into cardiac arrest, now let’s drag it into the bathroom and strangle it.”
And Sen. Liz Brater (D-Ann Arbor) called the proposal “reckless and irresponsible” and said it will do nothing to help the state’s economy.
But Republicans responded that the plan is reasonable to both keeping state government “living within its means,” and as a way of promoting economic development in Michigan.
Sikkema said the proposal provides tax relief for all businesses “We need tax relief for the job providers in this state if we’re going to have a growing economy,” he said.
The package requires that beginning in 2006, if the revenues from 11 state taxes grow more than the Detroit consumer price index plus an additional 1 percent then the first $50 million of that excess revenue will go to additional business tax relief. Above $50 million, the excess will be divided between tax cuts and payments into the Budget Stabilization Fund.
The package has been greeted coolly by many business groups and conservative economists. Some have said they would prefer the tax plan adopted in August by the House that called for larger overall cuts.
One of the few changes to the proposal is that the construction industry would still be able to take SBT credits for hiring apprentices.
“The tax package is dead on arrival,” said Granholm spokesperson Liz Boyd. “It provides no help to struggling manufacturers, it does nothing to promote good-paying jobs in the future, it does nothing to prevent outsourcing and in fact may encourage outsourcing.”
She also said the Republican package “chooses corporate tax cuts over Michigan families” and imposes unreasonable spending limits while continuing to allow tax loopholes.
That is a far tougher line than the governor had presented Monday when she merely faulted it for not doing as much for manufacturers as her plan would do. But Boyd said those observations were made without benefit of examining the bill.
And while the governor said the outline merited further discussion, Boyd said, “This plan was not shared with the governor and was moved today in rather unusual circumstances.”
Business groups largely damned the proposal with faint praise. Charles Owens of the Michigan branch of the National Federation of Independent Business – which has been one of the most aggressive groups in pushing the Senate to pass the House plan – said on review his organization still preferred the House version.
Rich Studley of the Michigan Chamber of Commerce said the organization hadn’t taken a formal position yet, but its member companies that it has heard from don’t care for the package. The tax relief is too small and comes too late to have much impact, he said.
And Chuck Hadden of the Michigan Manufacturers’ Association said the organization hoped the House builds on the Senate plan to provide greater relief to the state’s manufacturing industry. The industry is in crisis, Hadden said, and at the very minimum the Legislature should build on the personal property tax credit the Senate provided.
The revenue limit of the proposal also raised criticism. Mike Boulus of the Presidents’ Council of Michigan State Universities said the state’s future could be grim with the limit set. The revenue limit will lock into place cuts the state’s higher education system has endured over the last several years, he said, and that will come at a time when more and more students are being urged to attend college.
While Spencer Johnson of the Michigan Health and Hospital Association said the group supports changes in the state’s tax structure that will not push the cost for health care out onto business and working class families.
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