LEGISLATIVE ALERT

from Government Relations

October 7, 2008

Chamber MBT Priorities Move Forward

Two legislative priorities of the Chamber that impact Michigan’s tax policy passed the Senate last week.  The first would expedite the phase out the burdensome 22 percent surcharge on the Michigan Business Tax (MBT) over three years.  Senate Bill 1242 passed the Senate with a bi-partisan vote of 26-12, with Sens. Allen, McManus and Stamas voting in support.  Currently, the surcharge is slated be imposed until 2017, while the bill would eliminate the added tax by 2011.  The bill is estimated to save Michigan companies $212 million in 2009, with savings increasing to almost $700 million by final year of the three year phase-out.

The surcharge came about last fall as part of a compromise to repeal the ill-conceived tax on services.  The agreement to impose the surcharge was intended to be a short term fix for the budget and not a long term revenue generator for the State.  Elimination of the surcharge has been a top priority of the Chamber and the Regional Chamber Alliance.  

The second important piece of legislation would prohibit the application of a tax on a tax in the MBT.  Senate Bill 1038 would prohibit the MBT from being calculated and assessed on taxes collected by Michigan businesses as part of the gross receipts calculation.  The bill also passed in a bi-partisan manner with a 27-11 vote.  Those businesses paying the MBT surcharge would actually be paying a tax on a tax on a tax, which emphasizes the need for passage of the legislation. 

The House will need to adopt both of these pieces of legislation before the end of the year for them to take effect.  The Chamber supports both of these initiatives.  As one of five chambers in the state with full-time government relations staff working the halls of the Capitol, the chamber was able to communicate our support for both pieces of legislation to our Senate delegation.  We will continue to do so and advocate for adoption of the bills by the House upon their return.