LANSING – Michigan’s new business tax is complicated with a number of provisions that are detrimental to businesses, and not enough information has been distributed to this point so that many companies don’t even know about credits that will help offset the tax burden, said a report of a subcommittee of the Senate Finance Committee released on Wednesday.

Fixing the problems with the tax, which was created nearly a year ago, to replace the Single Business Tax, would prove complicated, the report said, especially since changes could prove a major hit to state revenues at a time when the state’s budget is constrained.

The report was issued after the subcommittee – chaired by Sen. Mark Jansen (R-Gaines Twp.) and including Sen. Jud. Gilbert (R-Algonac) and Sen. Mike Prusi (D-Ishpeming) – held four public hearings across the state on problems and concerns business owners and executives have with the tax.

While revenue figures for May have not been released yet, in April the MBT raised $407 million and had through that month raised less than $500 million. The basic tax was intended to be a revenue neutral replacement for the SBT, and at that level of revenues raised will come close to matching SBT revenues.

But the state added a surcharge to the tax last year to replace a controversial sales tax on services, and ending that surcharge was widely popular with witnesses at the hearings, even those companies that supported the basic premise of the tax.

The surcharge is especially having a “dramatic negative” effect on medium and larger businesses that do not have access to credits, including the small business credit, the report said.

Again, however, the report said phasing out or eliminating the surcharge with the smallest impact on the state’s budget would be difficult. The least effect on the budget would come through phasing the surcharge out over nine years, the greatest by either eliminating the surcharge altogether or over a three-year timeframe.

The report also said companies want the inclusion of sales taxes and other taxes and fees in the MBT’s tax base removed. Including those costs in a company’s tax base is “not reasonable by any standard of sound tax policy.” The provision particularly hurts retailers and service station owners, the report said.

Companies that have complained about the tax often do not know that they will receive a substantial personal property tax credit that will offset some of the cost of the tax, the report said.

In addition, many companies do not know about other credits they might be entitled to, the report said.

But the report was critical of the Department of Treasury, saying it had not provided adequate information on tax compliance issues and had generated some erroneous results through its website tax calculator.

Chuck Hadden, vice president for government relations at the Michigan Manufacturers Association, said the state had a disadvantage compared to Ohio when the Buckeye State enacted major business tax changes in that Ohio had three years to implement its changes while Michigan’s tax changes went into effect in one year.

It was time for companies to spend some time to review what the actual effect of the tax would be on their operations and from that make suggestions on how to change it, Hadden said, although he also called for the state to give companies the benefit of doubt for honest mistakes they might make in trying to enact the tax.

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