MBT Surcharge Under Fire

Business groups that successfully fought for repeal of a sales tax expansion late last year are now vowing to battle a 22% surcharge on the Michigan business tax that was passed as a replacement to the sales tax.

The Michigan Manufacturers Association supported tacking the surcharge on the MBT as the best way to allow the state to repeal the service tax expansion that was due to take effect Dec. 1, 2007, said spokesman Chuck Haddon. But now the group will push for its elimination as well.

“The credits offered in the original version of the MBT were a big selling point,” Haddon said in a statement, referring to the series of credits included in the original MBT bill that were later reduced as part of new legislation that added a surcharge. “When those credits were reduced, we were obviously very unhappy. That is why we’re working on a reform plan that will reduce the cost of government and enable the elimination of the MBT surcharge as soon as possible.”

The sales tax expansion was passed by a divided Legislature in late October as a last-minute push to pass a balanced budget, plug a $1.75 billion deficit, and avoid a looming government shutdown. The measure would have expanded the state’s 6% sales tax to apply to dozens of service-oriented businesses, many of which performed business-to-business work, and was expected to raise $750 million annually.

A large group of business groups united in opposition to the new law and offered instead to support a 22% surcharge on the new Michigan business tax, also calculated to raise around $750 million starting in 2009. In November, the Legislature voted to repeal the sales tax and replace the revenue with the new surcharge.

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