LANSING ? Michigan Legislative Republicans are considering eliminating the Single Business Tax altogether as they continue to review Democratic Governor Jennifer Granholm’s plan to overhaul the SBT.

Sentiment in the business community had been solid for a year to keep the state’s scorned Single Business Tax, but vastly improve it, and Gov. Jennifer Granholm’s SBT plan reflected this view. But now some GOP legislators and business groups are saying the question of whether the SBT should be eliminated outright should be examined.

In the past week, a theme has emerged: Legislative Republicans are starting with the very basics of the state’s business tax structure as they tackle Granholm’s plan. With the state’s economy continuing to struggle, there is strong sentiment to make the tax structure more economically competitive.

Among the broad questions under consideration: Should the Single Business Tax, the only valued-added tax on business among the 50 states, be eliminated? What about the Personal Property Tax businesses pay on their equipment that many feel is more onerous than the SBT? And if those taxes are to be eliminated or greatly reduced, is broadening the sales tax and applying it to services a viable option to replace some of the lost revenue? What about introducing a tax on corporate profits as a partial replacement?

These are not new questions. In fact, the Granholm administration pondered all of them after the governor asked Treasurer Jay Rising to embark on a review of the state’s tax structure in 2003.

In the end, Granholm proposed a plan that would cut the Single Business Tax 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). The administration says the plan would reduce taxes for 76 percent of businesses that pay the SBT.

But now that Republicans have had time to examine the governor’s plan, they are reverting back to the very basics on the state’s tax structure.

“We’re looking at every tax and fee in the state,” House Speaker Craig DeRoche (R-Novi) said Thursday.

DeRoche said there are three options for the Single Business and Personal Property taxes, and he put them in his order of preference: elimination, reduction or replacement.

The speaker said the Personal Property Tax is a bigger issue than the SBT because all businesses pay it. Of the possibility of broadening the sales tax to include services, Mr. DeRoche said he had “not advocated that or proposed that.”

Rep. Fulton Sheen (R-Plainwell), the House Tax Policy Committee chair, said he has been collecting a large number of suggested proposals from businesses on how to approach the tax structure.

“Are there all kinds of ideas and plans out there? Absolutely,” he said.

Most of all, the sense he receives from many business – and his own sentiment – is to make a comprehensive change to the tax structure, not to merely “tinker.”

Asked whether Ms. Granholm’s plan tinkers, Sheen said, “I think the governor’s plan is a step, but it’s not enough.”

In general, Sheen said businesses are asking to eliminate the SBT and not replace it.

But that is a nonstarter with Granholm, who has called for a revenue-neutral plan. The SBT is projected to provide $1.86 billion in revenues for the current 2004-05 fiscal year, all to the general fund. Wiping out those funds with no replacement would mean massive cuts to higher education, health care for the poor, the State Police, prisons and regulatory agencies.

“How do they plan to replace the revenue to the state budget?” asked Granholm press secretary Liz Boyd.

Boyd said it is obvious from the discussion taking place among Republicans that they have no plan of their own.

“It’s somewhat surprising that they would say they are just now going to start looking at how to restructure our tax on businesses at this stage of the game,” she said. “I think it’s a lack of vision, and I think in the end they need to take a step back and focus on the governor’s proposal.”

Through most of 2004, business organizations were essentially united behind the idea that the SBT should be improved, but retained. There was fear about what would replace it. And after three decades of existence, organizations felt they knew and understood the tax – and there is a lengthy body of case law on it.

But there has been some deviation from this view.

Sarah Hubbard of the Detroit Regional Chamber of Commerce said a Detroit Chamber workgroup comprised of many of its members concluded in the fall of 2004 that the best move would be to eliminate the SBT with no replacement. The group has not taken a position on Ms. Granholm’s proposal.

“If Michigan is truly serious about economic development, they need to get rid of the SBT,” she said.

But there remains sentiment that the SBT should remain with changes.

Chuck Hadden of the Michigan Manufacturers Association, the most critical supporter of Granholm’s plan, said simply wiping out the SBT would provide little help to manufacturers. As the predominant payers of the Personal Property Tax, they would continue to carry the burden of business taxes in the state, Hadden said.

Still, Hadden said the manufacturers welcome the burgeoning discussion about alternative plans. He also said he hoped it is true that Republicans will take a more comprehensive approach to changing the Personal Property Tax.

“I’m hopeful that some alternative plans will be talked about and shopped around,” he said. “The worst alternative is doing nothing.”

Hadden likened the rife chatter on GOP plans to where the Granholm administration was when it first undertook its review of the state’s tax structure. “When the administration started looking at this, they went through many of the same ideas,” he said.

And Sen. Nancy Cassis (R-Novi), chair of the Senate Finance Committee, said she still hears from businesses about the uncertainty simply eliminating the SBT would create. There would be continual worry about efforts at replacement revenue, she said.

“I believe it is very important to businesses to have a certain sense of security,” she said.

She concurred about the problems with the Personal Property Tax, saying it is as onerous, if not more so than the SBT.

Cassis said at this point she remains focused on reviewing Granholm’s plan (joint House and Senate tax committees are scheduled through May), “and then eventually we will have to come up with a plan that is as inclusive as possible.” She is not participating in discussions about alternatives although she said those talks are happening.

Of her own preference, Cassis said she has no “specific pet proposal in mind.”

Although House Republicans presently are gearing up for a potential wholesale change to the tax structure, Cassis indicated anything could happen.

“Whether it will be bold reform or whether it will be something more moderate – incorporate some of the governor’s ideas … or it will be something entirely new, I don’t think there’s an answer,” she said.

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