For Immediate Release
December 11, 2006

Michigan SBT Repealed

Michigan SBT Repealed

Michigan SBT Repealed

Citizens unite to overthrow Governor’s veto with petition drive.

The often ugly, and very unpopular Single Business Tax (“SBT”) has been repealed, effective December 31, 2007, due to a citizen-initiated law. The tax was slated to expire on December 31, 2009, but a petition drive to repeal the tax sooner began when the Governor vetoed a bill passed earlier this year by the Legislature to repeal the tax on December 31, 2007. The citizen-enacted law cannot be vetoed by the Governor.

The tax was adopted in the 1970’s with the idea that it would provide a stable source of revenue to the state. What it did was place a huge burden on the state’s job providers every year, whether or not those job providers were having a good year or a bad year.

The Legislature is now faced wit the task of replacing the SBT with a more feasible tax. They have until the end of 2007 to come up with a replacement, since the SBT will be effective until that time.

Following are some of the proposals currently under consideration.

  1. Michigan Fair Tax Plan – would not only get rid of the SBT, but also the personal property tax, the income tax, and payroll taxes. To compensate for the elimination of these taxes, the sales tax rate would be increased to around 9.5%.
  2. Business Activities Tax – a value-added tax that would allow taxpayers to choose to be taxed either on their profits or their gross receipts. Taxpayers would also be allowed to deduct some of their costs of doing business, something that was not allowed under the SBT.
  3. Business License Fee – an annual business license fee, akin to a franchise fee.

Whether or not the SBT is replacement with one tax or multiple taxes remains to be seen, but the Legislature has a very short period of time by which to make the change, as it seems highly unlikely that they will begin the process until after the November general elections.

If you would like additional information on this topic or have any questions, please contact the taxdesk@thesaltgroup.com

 

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