LANSING – A three-year phaseout of the surcharge added to the Michigan Business Tax would begin in 2009 under legislation passed by the Senate on a 26-12 vote on Thursday.

Also passed was a bill that eliminates current provisions in the MBT that include other taxes a business pays in its MBT base. But in amending the House version of SB 1038 , the Senate also dropped a tie-bar provision that would link the bill to changes in the Kreiner decision.

There was no action, however, on legislation that would have put a cap on the amount of tax credits that could be given for film productions.

The measures were hailed as a way of helping Michigan businesses as well as correcting some inadvertent errors in how the MBT was drafted.

Critics warned that it was irresponsible for the Senate to move quickly on the bills without calculating what the potential revenue loss could mean to the state budget.

And several Democrats criticized a provision in SB 1038 that would allow a tax break for stock brokers and dealers. Charging that it is the investment industry that has helped bring the U.S. economy to heel, they argued the state should not give a tax break to securities brokers.

But supporters argued back that as now written the MBT taxes securities dealers twice, and the change in SB 1038 would put securities dealers on an equal footing with other businesses.

The surcharge was added to the MBT a year ago when public pressure forced the Legislature to recede from a sales tax on some services that was approved as part of the budget resolution for the 2007-08 fiscal year.

With the surcharge the MBT, which was originally supposed to be a revenue neutral replacement for the Single Business Tax, now collects $700 million more than the SBT, Sen. Nancy Cassis (R-Novi), chair of the Finance Committee, said.

That additional tax burden hits businesses at a time when economic struggles have increased, said Sen. Mark Jansen (R-Gaines Twp.). “How in the world are you going to find jobs for people if businesses keep closing?” he asked.

Senate Majority Leader Mike Bishop (R-Rochester) said he recognized the concerns some expressed over the potential effect on the budget. But today was an effort to send a positive message to Michigan businesses, he said, and to help create a globally competitive environment for business.

Passing this bill (SB 1242 ) thanks those businesses in Michigan that have stuck it out, Mr. Bishop said, and provides a message to other companies considering new locations to look at the state.

Sen. Liz Brater (D-Ann Arbor), however, said passage of legislation like this is how the state found itself in fiscal trouble. And Sen. Michael Switalski (D-Roseville) said, “Where are all my good fiscal conservative friends?”

The measure would eliminate the surcharge over three years beginning in 2009. The estimated tax savings would be $212 million in the first year leading up to nearly $700 million in the third year.

Under SB 1038, approved on a 27-11 vote, companies with less than $6 million in gross receipts would be able to excise other taxes paid from the revenue and expenditure base they would pay tax on. The changes made by the Senate also eliminate from the base real estate broker and securities traders commissions.

The bill is expected to cost the state about $120 million in revenues.

The House included a tie-bar to HB 4301 (which would reverse the Kreiner decision that defined an injury under no-fault insurance) and HB 4628 (which would specify the state’s director of elections oversees the state’s campaign finance system and puts controls on robo calls). The Senate stripped that out, although Senate Minority Leader Mark Schauer (D-Battle Creek) attempted unsuccessfully to restore them.

Richard Blouse Jr., president of the Detroit Regional Chamber, praised the Senate action, saying it was a “significant step towards turning the state’s battered economy around. Now more than ever Michigan needs to encourage businesses to invest and grow jobs here, not chase them away.”

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

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