LANSING (AP) – The state Legislature has a lot of work left but little time remaining to repeal an unpopular tax on services before it takes effect Dec. 1.
The Republican-controlled Senate voted along party lines yesterday to replace the service tax by adding a temporary surcharge to Michigan’s main business tax.
But Democratic Gov. Jennifer Granholm doesn’t like the bill because she said it fails to bring in the same amount of revenue as the service tax, leading to what she called unacceptable budget cuts to education, health care and public safety.
Granholm also doesn’t like a part of the bill that eliminates the surcharge in 2011, leaving a potential annual budget shortfall of $750 million. She wants any solution to have bipartisan support, but Senate Democrats refused to support the GOP bill partly because they said it taps money that should go into the state rainy day fund.
Many in the business community support a measure passed by the Democrat-controlled House that would generate the same amount of money as the sales tax on services, which businesses oppose because they say it would cost too much, whether they were paying it or collecting it.
A House-Senate conference committee most likely will try to craft a compromise proposal next week when House members return Monday from a two-week break.
The biggest fight may be over how long the surcharge should last. Republican lawmakers want it to end three years from now, when the next governor takes office. That official can then decide if the surcharge should continue, said Senate Majority Leader Mike Bishop (R-Rochester).
But Democrats accused Republicans of reneging on a promise to raise tax revenues. They note that the service tax, which passed Oct. 1, didn’t include any date for being phased out or eliminated.
Senate Republicans don’t like the plan passed two weeks ago by the Democratic-led House because it contains an initial surcharge on businesses of 33 percent, which they say is too high.