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Michigan Picking the Wrong Battles

1 min readBy: Curtis S. Dubay

Michigan lawmakers are currently debating ways to improve the state’s economy and business climate. In fact, proposals to fix the state’s major 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. , the VAT-style Single Business Tax (SBT) have been submitted by the Governor’s Office and both houses of the legislature. However, two articles in today’s Detroit Free Press discuss alternate ways of spurring Michigan’s economy.

State Senate Majority Leader Ken Sikkema, R-Wyoming, has introduced a new element into the debate over the Michigan Single Business Tax: a provision that would rebate increases in state revenue beyond inflationInflation is when the general price of goods and services increases across the economy, reducing the purchasing power of a currency and the value of certain assets. The same paycheck covers less goods, services, and bills. It is sometimes referred to as a “hidden tax,” as it leaves taxpayers less well-off due to higher costs and “bracket creep,” while increasing the government’s spending power. back to businesses. (Full article here.)

Additionally, another bill proposes to make audits more business-friendly:

House Republicans in Lansing said Monday they’ll introduce a package of bills this week designed to make Michigan Department of Treasury tax audits more business-friendly. The bills would, among other things, bar retroactive rule making by the Treasury and give businesses the option of an informal hearing before contesting a tax bill in court. (Full article here. )

These proposals might make Michigan’s business climate marginally better, but they avoid the root of the state’s actual problem. Business is being driven out by the SBT, and until lawmakers fix it, businesses in Michigan will continue to struggle.

Look for the 2005 version of the State Business Tax Climate Index in the coming weeks for more on Michigan’s business climate, as well as the other states.