LANSING – When the Republican-controlled Legislature returns Tuesday from a two-week recess, it will begin tackling in earnest Democratic Governor Jennifer Granholm’s sweeping proposal to overhaul how businesses pay taxes.
Treasurer Jay Rising, the Granholm administration’s chief liaison on the proposal to reshape the Single Business Tax, will make his second appearance before a legislative committee on the subject, going before the House Tax Policy Committee on Wednesday. He met with the Senate Finance Committee before the break.
But fundamentally for Republicans, they eventually will have to decide whether to modify Granholm’s proposal or scrap it entirely and write one of their own.
Given years of GOP venom toward the Single Business Tax as burdensomely unlike any other state business tax in the nation, Republicans have said that simply rejecting the governor’s plan and keeping the status quo is not an option. There is the added motivation to address business taxation because the Single Business Tax is scheduled to expire in 2010.
Granholm’s plan would cut the SBT rate from 1.9 percent to 1.2 percent, change the tax’s formula to base it 100 percent on sales, provide a credit on personal property taxes paid, end some current credits like those for unincorporated companies and create a 2 percent tax on insurance companies’ premiums (SB 295, SB 296, HB 4476, HB 4477).
Republicans have embraced the personal property tax credit, which would primarily benefit manufacturers, and the rate cut, but voiced early concerns about the new tax on insurers and the application of the SBT to some businesses not currently paying it, among other details. Granholm has praised her plan as revenue-neutral, but Republicans say they will aggressively examine whether the plan would result in more taxes.
“Right now, the mindset is this: We want to come up with an alternative, but before we come up with an alternative, we want to have a little more time to examine the governor’s plan,” said Rep. Fulton Sheen (R-Plainwell), House Tax Policy chair.
There is some isolated support for scrapping the Single Business Tax altogether and writing an entirely new form of business taxation, but the prevailing sentiment in the business community – as has been the case for about a year – is to keep, but change, the SBT. Sheen said business sentiment means it is likely that House Republicans would stay within the confines of the Single Business Tax in whatever legislation they pass.
At this point, Sheen said he is undecided on when his committee will vote on an SBT proposal. The timing of a vote will depend on whether Republicans decide to alter the governor’s plan or start from scratch with an all-new bill. But doing nothing or simply extending the 2010 expiration date for the Single Business Tax is not an option, he said.
Whatever is done, he said the goal is to have something in place for business to use as of the beginning of 2006.
“The citizens of Michigan are expecting us to come up with some answers, and I believe that it is time that we did,” he said.
Sheen said his preference is to put together a package that results in a net cut in state taxes on business, saying the revenue-neutral approach by the governor is not necessarily the goal of him or the House Republican caucus. He also likened a cut in revenue to the state to a business that has to “spend money to make money” and sees a greater payoff if the tax package is successful in helping to stimulate the economy.
On the Senate side, Senate Republican spokesperson Ari Adler said Sen. Nancy Cassis (R-Novi), chair of the Finance Committee, will continue to hold hearings that will help determine what alternatives the Senate will propose. “I’m sure we’ll pass some of what the governor proposed and we’ll pass some of ours,” he said.
Adler said the Senate also will be treating as an entire package the SBT plan and the governor’s bonding proposal and “looking at which parts work and which don’t. We want to provide job opportunities and not send the state too much deeper into debt.”
OTHER ISSUES THIS WEEK: With legislators still scattered across the state and beyond, House and Senate spokespersons said the floor agendas for each chamber have yet to be fully developed.
The Senate’s prime target for floor action will be completing work on the four-bill package banning businesses from using a variety of schemes to avoid unemployment taxes while the budget will get serious attention in Appropriations subcommittees in both the Senate and House.
On the floor are House changes to SB 171 and SB 174, as well as HB 4414 and HB 4415 that were cleared by Senate Committee quickly after they were passed by the House.
Officials also had said prior to the break that the capital outlay budget (SB 235) for the current fiscal year would be the subject of action upon legislators’ return.
The House Oversight, Elections and Ethics Committee may take up Wednesday a bill that would make it easier to vote via absentee ballot (HB 4569).
This bill would eliminate current restrictions on who can vote absentee and allow an absentee vote without reason if the voters casts their ballot in person within a week of Election Day.
Voters wishing to cast their absentee ballot by mail, as many who vote absentee do, would still be required to meet the current criteria for an absentee ballot. Eligible persons include those with a physical disability, those 60 or older, those who have a religious conflict with voting that day, those who will be away from their hometown on Election Day and those confined in jail awaiting trial.
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