MACKINAC ISLAND – The Single Business Tax, loathed by a wide array of businesses almost from its birth in 1975, may not be doomed to the ashbin of economic history after all as part of the Granholm administration’s examination of the state’s tax structure.

Several business leaders, in discussions with the administration on tax structure, especially on how businesses pay taxes, are voicing some support for changing, not scrapping, the Single Business Tax. Discussions have been ongoing for the past six months and also were a strong topic of conversation at this weekend’s Detroit Regional Chamber of Commerce Mackinac conference.

The tax has long been criticized as confusing and unfair because it requires payments even in revenue-losing years for business. Ms. Granholm and Republicans have particularly criticized it because the tax includes workers’ wages in the amount that the state bases the tax, something that is considered a hiring disincentive. The GOP also dislikes the inclusion of health care costs in the tax.

The SBT replaced seven statewide business taxes, leading to its name as the single business tax. The major tax it replaced was the corporate income tax.
Under current law enacted during the Engler administration, the Single Business Tax will expire in 2010.

But as top business groups confront a new tax – mechanisms such as a corporate profits tax or gross receipts tax have been contemplated – they are confronting the fear of the unknown and seriously contemplating the benefits of changing the Single Business Tax, not replacing it.

Even though there is no gathering public momentum behind a new tax structure, the second look at keeping the long reviled Single Business Tax is surprising.
Governor Jennifer Granholm pointedly said in a speech to the conference that she wants to “retool” the Single Business Tax, which she called “lousy.”
Treasurer Jay Rising, who is heading up the administration’s work on the tax structure, said some business sectors have seen valuable aspects of the Single Business Tax, especially the way it treats capital improvements and does not punish highly profitable years the way a corporate profits tax would. Rising reiterated that he has not gathered consensus to move forward with a plan of any kind, but said the elements of supportive sentiment for the tax do not surprise him.

“I think if people start looking at the alternatives, they think, ‘This doesn’t look too bad,'” he said.

Chuck Hadden of the Michigan Manufacturers Association, whose members comprisethe bulk of Single Business Tax payers and have long been a critic of the tax, said keeping it is a viable option.

“We believe the SBT may be your best choice,” he said. “The problem (Mr. Rising) is running into – and we could see it coming – is that no matter which direction you go, somebody’s going to get clipped.”

Businesses are “scared” of what might replace the Single Business Tax, Hadden said. “I think there’s some ideas out there that could broaden the base, but keep the essence of the SBT in place,” he said. “We have tried to counsel the administration that it’s a tax we know.”

Rich Studley of the Michigan Chamber of Commerce, in comments that were surprising considering its longstanding criticism of the SBT, said it may turn out that keeping the tax, but in a different form, proves the best option. The questions of who pays business tax and how much should rank higher than what type of tax it is.

If the state dumps the SBT for a corporate profits tax that has one of the highest rates of that type of tax in the country, that’s not an improvement, Mr. Studley said. And forcing businesses to learn a new set of complicated regulations would prove nettlesome.

“For better or worse with the SBT, you’ve got 30 years of case law of what the tax is, what it isn’t, what certain words mean,” he said.

But Rising said “fear of the unknown” would not prevent the state from enacting a better tax model.

Dick Blouse, CEO of the Detroit Regional Chamber of Commerce, which has put together a workgroup of its own on the issue of tax restructuring, said opinion is split between large companies who are comfortable with it and the smaller ones who want it gone.

“A lot of the larger corporations like the SBT and would like to see it tweaked,” he said.

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