LANSING – Now that Michigan’s single business tax is headed to oblivion two years earlier than originally expected, the push to seek out an alternative tax takes on a more serious bent. Business organizations are working on proposals and guidelines for the Legislature to consider, the special joint committee to prepare recommendations on a replacement tax is soon to become more active.

There are a variety of complicating factors for lawmakers to consider as they work on a replacement tax – including if it should include a tax cut or full replacement revenue, which businesses should be taxed, and even when a new tax should be implemented.

Senate Majority Leader Ken Sikkema (R-Wyoming) has said the tax should be completed before December 31. And Sen. Alan Cropsey (R-De Witt) said the Legislature should act as quickly as it can to take advantage of the experience of the lawmakers remaining who worked on the Proposal A school finance solution in 1993 who would include the term-limited Sikkema.

Indeed, the Joint Select Committee on Economic Growth, formed to develop the proposal alternative, is directed to report its recommendation by December 1.

But there are some indications that House Republicans may want to delay a final decision until 2007.

And if Republican gubernatorial candidate Dick DeVos defeats Governor Jennifer Granholm there is speculation he would want to weigh in on the issue after he would take office in January 2007.

Adding a potential complicating factor is the Stop OverSpending proposal. Should it appear on the November ballot (and state elections officials have apparently not yet pulled the sample of signatures to test for its validity but have informed SOS officials that the final official count of petition signatures turned in is more than 501,000) and pass, could it affect when the Legislature could act on a replacement tax?

Charlie Owens of the National Federation of Independent Business speculated that as written if the Legislature approved a replacement tax in 2007 the SOS would require it go before the voters before it could take effect.

A spokesperson for the SOS organization, however, said the proposal should not affect a replacement tax since the amendment would use the 2006-07 budget as its base year for application. And that fiscal year will include revenues from the SBT, said Scott Tillman.

The select committee has only met twice to this point, but a legislative staff member, who did not want to be identified, said it would meet later this month and would begin meeting a minimum of twice a month up to its deadline. The committee has also asked a number of organizations for its input on tax proposals.

The Detroit Regional Chamber is one of the few organizations to have proposed a replacement at this point: a business licensing fee arrangement that would be based on sales and leave the state with an overall tax cut of $300 million.

The proposal would exempt businesses with sales of less than $350,000 and put a cap of $1 million on the fee any one company would pay.

Sarah Hubbard of the Detroit Regional Chamber said the organization is meeting with a variety of organization on reviewing and refining its proposal. House Majority Floor Leader Chris Ward (R-Brighton) has already introduced the proposal as HB 6272 .

The exemption of businesses making less than $350,000 is a critical factor for the NFIB for whatever replacement tax is enacted, Owens said. The organization has not yet formulated a proposal to bring to the Legislature, he said, but ensuring that those businesses not now paying the SBT remain exempted is important.

An initial poll of members also found some interest in the Fair Tax concept, which would replace not just business taxes but income taxes and the basic sales tax, with a consumption tax on all goods and services, Owens said, especially when the idea of one tax replacing other taxes is included.

The Small Business Association of Michigan has also expressed interest in the Fair Tax concept because it clearly shows a tax at the end of the production and sales system instead of absorbing the cost of taxes into the price of a product or service.

But Rob Fowler of SBAM also said the organization will work on an overall proposal. Its committee to help set policy meets next month.

Also slated to issue its proposal in September is the Michigan Chamber of Commerce. Tricia Kinley of the chamber said the organization’s tax committee has been meeting on a series of ideas since February. The organization has also hired the accounting firm of Ernst & Young to review the proposals for their financial soundness.

The group will make its recommendation to the chamber’s board on September 21.

The group has rejected a number of proposals at this point, and ironically is not enamored of the Fair Tax proposal, she said. “It’s not workable and it doesn’t make sense,” she said. Among the proposals the organization is reviewing is a broad-based business income tax or a low-rate gross receipts tax.

And the organization also believes the tax should include an overall cut of $500 million, Kinley said.

The Michigan Manufacturing Association also has not developed a proposal for a replacement tax but it has developed a set of four guidelines legislators should follow for the tax, said Chuck Hadden.

High among those proposals is that “all business should share in the state’s tax burden.” Manufacturers were among the chief payers of the SBT, and according to its principles carried a “disproportionate share” of the burden.

“Because every business benefits from government services, all businesses should pay for those services. The new tax plan created should be as broad as possible, with rates as low as possible,” the guidelines said.

Among the other principles the MMA is urging: look at all business taxes, especially the personal property tax, which is the tax manufacturers actually most hate. The organization also calls for the transition from the SBT to the replacement tax to be as simple as possible and for the tax to be as simple as possible.

One of the biggest complaints about the SBT was its complexity, so the MMA said the replacement should be “straightforward and as easy to understand, determine and administer as possible.”

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