2007 Senate Bill 687 (Revise “deferred assets” taxation under new state business tax )

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Introduced by Sen. Jud Gilbert on August 22, 2007, to revise the profits tax component of the new ”Michigan Business Tax” to add a new deduction for businesses that realize an increase in their deferred tax liability due to the enactment of the new tax. Reportedly this liability could create the unintended consequence of imposing much higher taxes on businesses due to a new accounting standard related to “deferred assets” (“FAS 109”).
- Referred to the Senate on August 22, 2007.
- Substitute offered in the Senate on August 30, 2007. The substitute passed in the Senate by voice vote on August 30, 2007.
- Amendment offered by Sen. Michael Switalski on September 5, 2007, to place a five-year sunset on the amendment the bill would make to the new Michigan Business Tax. The amendment failed in the Senate (16 to 22) on September 5, 2007. [Vote Details and Comments]
Passed in the Senate (26 to 12) on September 5, 2007. [Vote Details and Comments]
Received in the House on September 5, 2007.
- Referred to the House Tax Policy Committee on September 5, 2007.
- Motion by Rep. Brian Calley on September 26, 2007, that the Committee on Tax Policy be discharged from further consideration of Senate Bill No. 687. The motion passed in the House (109 to 0) on September 26, 2007. [Vote Details and Comments]
- Referred to the House Tax Policy Committee on October 9, 2007.

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Comments

Introduced by Sen. Jud Gilbert on August 22, 2007. Passed in the Senate (26 to 12) on September 5, 2007. New Comment

1) Sen. Switalski's "journal statement" [by Admin003 on September 6, 2007]
Senator Switalski's statement is as follows:

This is a very complicated issue, and I wish my colleagues on Senate Finance had been given time to hold hearings on this matter before it came to the floor. But, although it's a very complicated issue, one thing is clear; It will remove hundreds of millions of dollars from the Michigan business tax. There is no debate on that issue. The only question is how much money it will cost.

The Treasury Department indicated to the House, during their second committee meeting on this issue, that the bill could cost $1 billion; $100 million per year for ten years. Mr.President, I doubt that anyone here would like to carve another $100 million out of our current budgets, yet that is the task we are leaving to the Senators who are going to follow us here in the future. If we think it's going to be less than that, I'm sure we could put a cap on that. That might be the smart thing to do.

Having said all that, this amendment in front of us here today seeks to restore the level of funding that we all agreed to when we said we wanted a revenue-neutral MBT. That was a principle that we all adhered to; let's keep this revenue-neutral. This amendment would restore that. This would do that by increasing the rate of the business tax portion of the MBT for ten years during the period of this fast 109 deduction, and thereafter their rate would return to the 4.95percent--very simple.

Mr.President, my view is that any adjustment in the business tax should be paid for by an adjustment elsewhere in the business tax. I hope my colleagues will support my amendment.

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2) Sen. Prusi's "no vote explanation" [by Admin003 on September 6, 2007]
Senator Prusi's statement is as follows:

Recalling last week when this bill was discharged to the floor without a hearing in committee and making the remarks to the effect that this is a very complicated and technical issue, I would challenge anyone on the floor here to explain it and understand it fully at this point.

We're faced with a myriad of issues left this year before September 30th, and I would question why in this short time frame we are moving this business tax cut ahead of all of the other problems we have and all of the other issues that we're facing as we attempt to close the 2007 budget in the black, as well as provide revenue for the outyear.

I would encourage members to stop and think a little bit about what we are undertaking here and understand the actual ramifications of what we're doing and the legacy that we're proposing to put in the outyears here and not look at this as some simple little quick fix that is not going to have an impact. It is going to have an impact. It's going to have a direct and dramatic impact, and it's something that I think we needed to spend a little time in committee with, taking testimony. We also need to take into account the other problems that are facing the state as we work through this budget situation here.

I intend to vote "no" on this, and I would encourage members to vote "no" as well.

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3) Sen. Scott's "second journal statement" [by Admin003 on September 6, 2007]
Senator Scott's second statement is as follows:

I am happy that the former speaker pointed out that this will regrettably end up with our children and our grandchildren. What great legislators we are for doing that.

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4) Sen. Scott's "no vote explanation" [by Admin003 on September 6, 2007]
Senator Scott's first statement is as follows:

I rise to speak in opposition of this bill. We are talking about giving up $1 billion in revenue. We have no idea how it will be replaced. We can't cut $1.7 billion out of our existing budget; how do we think we can cut an additional billion--One billion is 32,258 prisoner beds or 10,309 state troopers. How many fire trucks can $1 billion buy? How many potholes do you think we could fix with $1 billion? We could buy millions of new math books for all Michigan students. Let's hope they learn more from them than you have. We could send over 100,000 kids to college for $1billion.

This isn't a targeted tax break. This is a give-away to big business, and we want to freeze the earned income tax credit for low-income citizens. This doesn't make good policy, Mr.Lieutenant Governor.

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