Politicians don’t like voting for new taxes, but with Michigan’s Single Business Tax scheduled to sunset at the end of 2007, the state Legislature has little time to waste in replacing the $1.9-billion hole the SBT’s elimination will leave in the budget. Granholm released a plan for a new business tax last week, and it is up to this Legislature to make it law.
Doing without the SBT’s revenue is simply not an option, unless the state wants to eliminate its public universities or get rid of its prison system. And even restoring just part of the revenue is unwise – inflation-adjusted general fund revenues have already fallen 28 percent in the past seven years, and further reductions would only deepen state’s structural budget deficit.
The plan has substantial support from both sides of the aisle, and with good reason: The tax restructuring avoids a number of the SBT’s problems while fully replacing its revenue. The next step is for the state Legislature to consider the plan thoroughly and adjust it as needed before the end of the year. Instituting a new tax plan now, however, is a must to give the state and businesses adequate time to implement the new rules.
Those seeking a net tax cut argue that restructuring Michigan’s business tax now is irresponsible. This claim is misguided: Legislators have had months to consider how to fix Michigan’s business tax, and there is no reason why they can’t reach a decision now. What is irresponsible is eliminating a tax that provides one-quarter of the general fund and heading into the new year without a plan to replace it – the result of Oakland County Executive Brooks Patterson’s hasty petition drive, conveniently timed a few months before November’s elections.
After Democrats take control of the House in January, it may be easier to reach a consensus on Granholm’s plan. But the plan on the table is reasonable and a significant improvement over the SBT. The current set of legislators broke the tax code, and they should fix it.