LANSING – Mid-sized businesses would get some $254 million in annual relief from the new Michigan Business Tax under a bill approved with a nearly solid party-line vote in the Senate Tuesday. The bill (SB 1198 ) increases credits available for owners’ compensation and expands entrepreneurship credits.

Sen. Nancy Cassis (R-Novi) said the bill is a partial answer to the many businesses that have seen their tax liabilities zoom four or five times or more compared to the old Single Business Tax. She said businesses facing that kind of increase are scaling back plans to add workers or make new investments, and some are looking to leave the state.

In the four months the MBT has been in effect, Cassis said, “We have learned that the new MBT benefits the smallest companies – those who don’t have receipts more than $350,000 – and benefits Michigan’s largest manufacturers. But those in the middle are significantly impacted and left behind.”

Sen. Michael Prusi (R-Ishpeming) characterized advocates of the tax breaks as “trying to have it both ways” by voting for tax cuts at the same time most have backed spending bills based on revenue estimates of an intact MBT. He was unsuccessful with a proposed amendment to tie the bill to another bill extending unemployment benefits by 13 weeks.

“The least we can do with a state that is leading the nation in unemployment is provided extended benefits to workers who are struggling to find jobs,” he said.

Republicans opposed the amendment, which was defeated on a 19-19 vote, because of its $600 million cost to businesses.

The bill’s more generous tax breaks include raising to $250,000, from $180,000, the income level of business owners for the business to be eligible for certain credits; and enhancing the entrepreneurial tax credit by allowing businesses to claim as much as a business’ entire tax liability (current law allows a credit equal to the taxes owed due to increased employment) and extending the credit beyond 2010.

The Senate Fiscal Agency estimates the provisions would cost the state $254 million in a full fiscal year in lost revenue. It estimates the impact in the current fiscal year at $161.9 million.

Joining Republicans in sending the bill to the House were Sen. Glenn Anderson (D-Westland) and Sen. Jim Barcia (D-Bay City).

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