While browsing the Internet on Sunday, I came across Forbes.com’s fourth annual “The best states for business,” which is just what it sounds like — a ranking of the 50 states based on their appeal to businesses. The article took into account such factors as business costs, labor, regulatory environment, economic climate, growth prospects and quality of life. Even before I opened up the slideshow with the results, I wasn’t too optimistic about Michigan’s placement.

In all honesty, I wasn’t expecting Michigan to appear until I made it to the 40s. But it was still depressing as I cycled through the slideshow, my slow Internet connection forcing me to dwell on state after state that is better off than the one I’ve lived my whole life in.

Finally, Michigan made its appearance at No. 49 (if you’re curious, Rhode Island was last). Michigan was ranked last in the crucial categories of economic climate and growth prospects, and also scored badly on business costs (39th) and labor (46th). Some of these factors have to do with the decline of the auto industry and aren’t immediately fixable. But one contributing factor in Michigan’s failing grade can be fixed and should be, soon — the astronomical cost of doing business in this state. In other words, taxes.

It’s somewhat ironic that Michigan’s oppressive business tax is such a pressing concern when the government gave it a complete overhaul just two years ago. The Michigan Business Tax replaced the Single Business Tax — which was widely regarded as overly complicated and burdensome — in January 2008. Jeffrey Guilfoyle of the Michigan Department of the Treasury predicted in a study released in September 2008 that 72 percent of Michigan taxpayers would pay the same or less under the new system.

If a government study predicts something, it must come true, right? But just one month later, the Michigan Chamber of Commerce conducted a poll of its members. Of the 700 who responded, about 80 percent said they paid more in taxes under the new system. A separate survey by the Chamber of Commerce found that the MBT — and the surcharge tacked on to it — were Michigan’s number one problem.

The 22 percent surcharge, which is among the most egregiously burdensome components of the MBT, pays for tax breaks for the film industry, among other things. While businesses in the state struggle to stay afloat in the midst of a disastrous economy and mounting tax burden, their dollars are being handed out to already wealthy studio executives. These executives are just waiting to flee the state as soon as the money they’re leeching from local businesses runs out.

And if the MBT stands for much longer, the money will run out. I asked a friend of mine who is a businessman in the apartment business what his tax burden is like under the new system. He told me that his tax burden increased substantially from the SBT to the MBT. And he most certainly isn’t alone. According the Mackinac Center for Public Policy’s Oct. 30, 2008 assessment of the Chamber of Commerce poll, “One-third of those reporting hikes said the increase was in excess of 100 percent over the SBT; eleven percent reported a hike of more than 300 percent and one member reported a tax increase of 1,000 percent.” The assessment also found that 15 percent of those hit with the tax increase planned to stop expanding or leave the state.

So there you have it. Businesses are leaving Michigan and, if the Forbes.com ranking is an indication, no business in its right mind would ever want to come to Michigan. This reality should put the state legislature’s current budget debate in an entirely different context. It doesn’t really matter whether legislators cut enough programs to solve a multibillion-dollar deficit — the deficit is clearly going to be worse next year when there are even fewer businesses left to pay taxes.

If the legislature has any interest in salvaging the disaster that is the state economy, it will repeal the MBT and make Michigan a slightly more attractive place for business. As long as the MBT remains, legislators might as well make it official that their goal is “No. 50 in 2010!” Rhode Island will even thank them for it.

Robert Soave is the Daily’s editorial page editor. He can be reached at rsoave@umich.edu.

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