As was discussed in the Digest last week, despite (or perhaps because of) all the recent changes that have been made to the Michigan Business Tax (MBT), many businesses in the state are still unhappy with their tax bills. That frustration most recently materialized in the state senate in the form of two bills: one seeking to reduce, and one seeking to eliminate entirely, the annual surcharge imposed on the MBT. Both bills passed last Thursday. The surcharge was originally enacted to help fill the gap created by the repeal of the services tax.
Because of the fervor with which Michigan businesses have been voicing their displeasure with the surcharge, policymakers are now clamoring to appease them. But given the importance of government services to Michiganders, especially during these difficult economic times, it seems indisputable that the state should not begin cutting business taxes until other revenue streams are secured. Fortunately, Governor Granholm has said that she would only support reducing the surcharge on the condition that the lost revenues are offset with higher revenues from elsewhere.
Of course, a variety of good options exist for raising additional revenues in Michigan. At the top of that list should be an enhancement of the progressivity of the state's income tax, so that the rest of the state can begin to share in the enormous gains wealthy Michiganders have enjoyed in recent decades. Aside from that, a good starting point for policymakers would be a careful examination of this list, put together by the Michigan League for Human Services, of questionable tax exemptions, deductions, and credits.