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The Battle over Michigan?s SBT: Round One

2 min readBy: Jonathan Williams

As expected, Michigan Governor Jennifer Granholm delivered on her promise to veto HB 5743. The vetoed legislation would have accelerated the phase out of Michigan’s Single Business TaxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. (SBT). From the Detroit Free Press:

“The bill Granholm vetoed would have meant the Single Business Tax, the state’s main business tax that nets $1.9 billion annually, would have expired Dec. 31, 2007. Under existing law, the tax is scheduled to die Dec. 31, 2009. Supporters of moving up the repeal say the state cannot afford to wait until 2009 because of its weak economy. They say the SBT’s taxation of payroll and income — regardless of profit — discourages new businesses in the state.”[Full Story]

Explaining her veto, Gov. Granholm stated: “Pass a bill that also guarantees that businesses will pay their fair share of taxes without forcing Michigan families and citizens to shoulder new tax burdens.”

In a recent commentary in the Lansing State Journal, Tax Foundation Attorney, Chris Atkins and I explain the economic folly of rejecting SBT repeal, because it would “shift” the tax burden from businesses to individuals.

“No one should kid themselves about who ultimately pays the price of business taxes like the SBT: the people of Michigan. The first to pay are employees of Michigan businesses – people who make lower wages or perhaps even lose their jobs. Next are those who have investments in Michigan businesses. Finally, consumers pay more at the cash register for goods made by Michigan companies. In other words, the old saying is true: corporations don’t actually pay taxes – people do.” [Full Story]

Regardless of the Governors veto, there is an active attempt led by Oakland County Executive, L. Brooks Patterson, to gather petition signatures to accelerate the elimination of the SBT. If the SBT petition drive garners at least 254,206 valid signatures by May 31st, the legislature could re-approve the measure without the chance of another veto.

You can learn more about Michigan’s tax climate here.