Published October 24, 2005
LANSING (AP) - Michigan businesses would pay $1 billion less in taxes over six years with the potential for more relief under a Republican plan that also would limit state spending.
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The state Senate intends to vote Tuesday on business tax cuts aimed at stimulating the state's sagging economy, a day after GOP senators unveiled their revised tax proposal.
Future tax cuts would be tied to a measure that would limit state spending growth to no more than the annual inflation rate plus 1 percentage point.
Critics have said that's unwise because state revenues are in a trough and the state would struggle to restore cuts to universities and other programs. They point to problems in Colorado that have arisen because of spending caps passed there.
The Senate plan would make up $519 million of the lost revenue by eliminating tax exemptions, changing the way commercial rental property is taxed and stiffening the penalties for late tax payments. But it also would bring in $483 million less in tax revenue than if the cuts weren't in place.
Senate Majority Leader Ken Sikkema said Michigan must do everything possible to turn around its high unemployment rate, which fell to 6.4 percent in September but has hovered around 7 percent for the past year. Some of the tax cuts would take effect in January.
"It's business that provides the jobs for our citizens," the Wyoming Republican said Monday. "I am convinced that to encourage business growth and attract business investment, the business tax burden has to be reduced."
The bills would provide tax relief of $100 million in the fiscal year that ends Sept. 30, 2006. The revenue loss would not hurt the current state budget because it would be paid for with extra money left over from last year's budget and bringing in more revenue through changes in the tax code.
Businesses could receive another $1.4 billion in tax cuts over six years if state revenues increase over the proposed spending cap. If state revenue _ excluding federal dollars _ exceeded the spending cap, the extra money would trigger more business tax cuts and other dollars would go into the state's rainy day fund.
Sikkema said the legislation builds off business tax cuts approved by the GOP-controlled House in August.
Democrats on Monday were skeptical, and at least one economist said the plan did little to help manufacturers, which have had a spate of bad news lately with Delphi Corp. declaring bankruptcy and Ford Motor Co. announcing it plans future plant closings.
