Comments on this legislation    Post new comment    Text and Analysis    Add to Watch List 
  Previous   Next 

• Introduced by Rep. Barbara Farrah (D) on March 1, 2007, to establish a new business tax to replace the revenue from the Single Business Tax (SBT), which expires at the end of 2007. This new “Michigan Business Tax” proposed by Gov. Granholm would impose levies on business profits, gross sales and on a firm’s total assets, very broadly defined. The asset tax would apply not just to assets located in Michigan, but all a firm’s assets, multiplied by the proportion of its sales that take place in Michigan. The proposal would also exempt business tools and equipment (the “personal property tax”) from the 6-mill state education tax and the 18-mill school operating tax. This would save businesses approximately $600 million, which amounts to around one-third of total personal property taxes (firms would still be subject to local personal property taxes.) There is also a tax credit for workers employed in a company headquarters located in Michigan. In the aggregate, the tax changes would take in approximately $480 million less than the SBT. However the bill is tie-barred to Senate Bill 307 (or House Bill 4368), which means it cannot become law unless one of those (identical) bills do.
  • Referred to the House Tax Policy Committee on March 1, 2007.
    • Reported in the House on May 2, 2007, with the recommendation that the substitute (H-3) be adopted and that the bill then pass.
  • Substitute offered in the House on May 2, 2007, to replace the previous version of the bill with the House Democratic Caucus proposal for a new Michigan Business Tax. The substitute was defeated "on second reading" and later adopted "on third reading" as a parliamentary maneuver to prevent voting on Republican amendments. The substitute failed by voice vote in the House on May 2, 2007.
  • Substitute offered by Rep. Paul Condino (D) on May 2, 2007, to replace the previous version of the bill with the House Democratic Caucus proposal for a new Michigan Business Tax to replace the revenue from the Single Business Tax (SBT), which expires at the end of 2007. The “revenue neutral” plan would impose a 6.95 percent profits tax and a 0.488 percent annual tax on a firm’s net worth, (in proportion to its sales in Michigan); approximately half the proposal’s revenue comes from each of these. If aggregate revenues exceed the SBT (currently around $1.9 billion) by more than 10 percent, the difference would be refunded to all taxpayers, but this provision expires after two years.
    The proposal includes various exemptions and credits for Michigan payroll, capital investments, research and development, and personal property taxes; all told these amount to some $700 million. The credits are intended to shift the tax burden more to firms located outside the state, but they also disproportionately benefit capital-intensive industries (such as auto makers, who will pay less than currently.) Small businesses could choose an alternative 1.8 percent profits tax, and their tax liability would be phased in as receipts increase from $350,000 to $700,000. An existing 1.07 percent insurance premium tax would rise to 1.25 percent. Property taxes paid on the capital tools and equipment (personal property) of industrial firms would be approximately 73 percent lower than currently for industrial firms, and 46 percent lower for other businesses. The substitute passed by voice vote in the House on May 2, 2007.
• Passed 61 to 48 in the House on May 2, 2007, to establish a new business tax to replace the expiring Single Business Tax (SBT). This “revenue neutral” proposal of House Democrats would impose a 6.95 percent profits tax and a 0.488 percent annual tax on a firm’s net worth. Various exemptions and credits are intended to shift the tax burden more to firms outside the state, but also disproportionately benefit capital-intensive industries (such as auto makers, who will pay less than currently.) See the Paul Condino substitute and the analysis here for more details.
  Who Voted "Yes" and Who Voted "No"
• Motion in the House on May 2, 2007, to give the bill immediate effect. The motion failed 58 to 50 in the House on May 2, 2007.
  Who Voted "Yes" and Who Voted "No"
• Received in the Senate on May 8, 2007.
  • Referred to the Senate Finance Committee on May 8, 2007.