Last week the state Senate approved a plan to replace the state’s controversial new sales tax on services by creating a 13.85 percent MBT surcharge. The plan would also put a January 1, 2011 sunset date on the increase.
The Senate proposal counters a House plan which set the surcharge on the MBT at 32.9 percent for the first year and lowered that to 27.3 percent in later years. Medium size companies are hardest hit, as companies under $20 million in gross receipts after deductions would pay a 1.8 % small business tax rate.
The House proposal initially included a cap on the maximum surcharge on what any one company would pay. This cap was set at $2 million, thus protecting the state’s 37 largest corporations and shifting the burden to medium size companies. MITA was successful in fighting to raise the cap, which was increased to $7.5 million in the Senate-passed version.
MITA has also been working with the Associated General Contractors (AGC) on a “grandfather clause” which would allow revenue derived from existing contracts to be exempt from the proposed surcharge. That idea is still being discussed but has not yet been included in the legislation.MITA’s overall position on the MBT surcharge is loud and clear: double-digit tax increases on already struggling job providers will hurt the economy. In testimony, MITA staff argued that a surcharge of any size on a business tax, which has yet to be implemented, is absurd if the goal is to turn Michigan’s economy around.
However, it seems imminent that the sales tax on services will be replaced with some form of an MBT increase.
With the House scheduled to return this week, the state is left with five days to act to repeal the tax or pass legislation delaying the tax’s implementation until December 20.
If you have any questions please contact Mike Nystrom, Vice President of Government and Public Relations at mikenystrom@mi-ita.com ; or Keith Ledbetter , Director of Legislative Affairs at keithledbetter@mi-ita.com ; or by calling the MITA office at (517) 347-8336.
