We'd like to know what you think about our successful fight to repeal the sales tax on services!
Send your email to advocacy@sbam.org and we'll post it here. Emails may be edited for length.
"I want to express to SBAM the appreciation on behalf of the membership for your extensive and continuing work of the repeal of the services tax. While this replacement tax is far from ideal, your efforts have won a reprieve from a certain death sentence for countless Michigan businesses. As I reflect on all that has transpired in the last 60 days I am grateful that a tragedy has been narrowly averted. In reality the real heroes in this fight are you guys, SBAM, and those who fought our elected officials on an issue that was clearly ill-conceived and poorly executed. I am hopeful that from all of this mess and from your collective efforts, that SBAM's membership will rally to take a more active role in selecting those who serve in our state. Job well done, SBAM. Good work!"
David Rhoa
Lake Michigan Mailers
SBAM Member since 2000
I was paying close attention to that silly tax they were trying to pass. Thank goodness it was repealed. Good job!
Renee
Great job on the service tax repeal!! Thank you! Thank you! Thank you!
Nicole, Weddings by Nicole
We do have power when we stick together. All of us have worked tirelessly as individuals and as a business association and I am extremely pleased we have been able to beat back another of our “Governor Granholm” ill conceived “solutions” to Michigan’s problems. Keep up the good work and thanks for helping us “fight the good fight.”
Nicholas G. Maloof, RPG, President & General Counsel
Associated Environmental Services , LLC, Bloomfield Hill
The State Budget and How We Got HereBy Todd Anderson, Vice President Government Relations, Small Business Association of Michigan
Unfortunately, our elected officials, led by the governor, insisted this fall that the budget had been cut to the bone and that taxes had to be raised. SBAM continued to forcefully advocate and show that the budget could be cut without raising taxes. We also argued that a tax increase on business in this economy was the absolute worst thing that could be done. We talked to countless legislators throughout the weekend of Sept. 29-30 as the budget deadline approached. Despite our efforts, those elected officials chose to raise the income tax and create the services tax at 4 a.m. on Oct. 1.
The SBAM Reaction: Our immediate SBAM position was that the services tax should be repealed without any replacement revenue. We were the first organization to call for its repeal – the day after it was enacted. Most felt that there was no chance that the services tax would be repealed by the legislature. We formed the Ax the Tax coalition with dozens of other business organizations and we were ready to go to the ballot next November to defeat the services tax. We would have done so if it was not repealed. The only negative part of that approach is that the services tax would have caused much harm to small businesses for the 11 months it was in place, and success at the ballot box in November 2008 was not guaranteed.
The Surcharge. While we do not like the surcharge, we were able to achieve some improvements:
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The Rate. The original proposal called for a 33% surcharge and the rate was lowered to 21.99%.
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The Cap. Large Corporations had been successful in getting a cap of $2 million in the first proposal. It was a great deal for them and it would have significantly cut their tax liability at the expense of small-to-medium size companies. We got the cap increased to $6 million, which helped us to get the rate lowered.
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The Effect on Small Business. Most importantly, most small businesses are NOT affected by the surcharge. Businesses with less than $350,000 in gross receipts do not pay the Michigan Business Tax and will not be affected by the surcharge. Firms with less than $18 million in gross receipts, with less than $165,000 in officer compensation, and less than $1.3 million in profit, are eligible for the “Small Business Alternative Profits Tax” of 1.8%. The surcharge does not apply to these companies either. Unfortunately, the companies that don’t meet these thresholds will still be harmed by the surcharge.
Next steps. We here at SBAM are not happy that some companies will still be affected by the surcharge. One of our new top priorities will be to get the surcharge eliminated.
How the Surcharge Works: The surcharge is applied before credits in the Michigan Business Tax structure. Therefore, the 21.99% is tacked on a firm’s tax liability and then the credits are applied. That is how the “Small Business Alternative Profits Tax” works. A business is credited for any amount above 1.8% of their profits, so the surcharge just means that the amount of their credit will be larger, and they will not pay any more to the government. (For more information, please contact us at 800-362-5461 or advocacy@sbam.org).
For certain, we here at SBAM do not like the surcharge. We think it is a tax increase on business when business can afford it the least. We do believe, however, that it is a very significant victory that the door was shut on the services tax. If the services tax had remained in place, every year the government could continue to add services that would be taxed. We heard from countless businesses owners who would have faced huge tax increases because of it. The large majority of the tax was on business-to-business services, which would harm both the purchaser and the seller. Companies that both purchase services and sell services were hit twice. New figures were being shown that indicated the services tax would have been at least a $2 billion dollar tax increase as opposed to the $750 million that had been originally claimed.
We celebrate the demise of the services tax, but we certainly do not celebrate the Michigan Business Tax Surcharge.
The fact that a majority of our elected officials decided that it was a good time to raise taxes on business only shows the need to elect more candidates who truly understand small business. While nearly all politicians claim to be for small business, and for jobs, their actions show otherwise. We look forward to working with our members in the future to make sure more pro-small business legislators – who walk the talk – are elected.
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Thursday, 13 December 2007 |
Services tax is repealed, but at what cost?
Small firms should back officials who cut spending, stop tax hikes
Michael W. Rogers and Todd Anderson
State legislators and the governor concluded a wild roller-coaster
ride for business tax policy when they at the last minute on Dec. 1
repealed the 6 percent sales tax on services. The replacement: a 21.99
percent surcharge on the Michigan Business Tax.
The action
wrapped up a contentious and emotional two months of struggle for the
Michigan business community. Faced with a new sales tax on services
that was almost universally despised by small business owners, the
Small Business Association of Michigan and its members fought for
outright repeal and no replacement revenue -- a principled stand that
faced tough sledding against an ideologically divided state Legislature
and a governor who insisted that Michigan's budget had already been
"cut to the bone."
Both our group and the Center for Michigan
have shown that the state could save hundreds of millions of dollars by
making state employee benefits more similar to those offered in the
private sector. Both the Mackinac Center for Public Policy and House
Republicans proposed plans that showed where the budget could have been
cut to repeal the sales tax on services and fill the gap so no tax
increase was necessary.
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Friday, 30 November 2007 |
Repeal the Service Tax Petition Drive Q&A
The new six-percent sales tax on services goes into effect at 12 a.m. on Dec. 1., as all legislative efforts to repeal the tax have so far failed. If and when the tax takes effect, a statewide petition drive begins in full force to do what Legislature and governor could not: Repeal the service tax.
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Friday, 30 November 2007 |
Bracing for the service tax
Detroit Free Press, Nov. 30
Susan Tompor
So will it stick or won't it?
The new 6% service tax is like one of those bad snowstorms that everybody
hoped would skip town. Even the forecasters warned that this thing couldn't last
long. This oddly crafted tax on services -- 6% on nails but not hair; 6% on ski
lift tickets but not golf -- is so dopey that most expected it ultimately had to
be repealed.
Nobody thought the tax, crafted
Oct. 1, would really go into effect Dec. 1 -- which, in case anyone bothered to
look, would be 12:01 a.m. Saturday. Common sense, right?
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Friday, 30 November 2007 |
State lawmakers stumble yet again
The Detroit News, Nov. 30
Daniel Howes
Forget the "Great Lakes State." Based on recent behavior, Michigan's motto
should be "Embarrassments 'R' Us."
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Friday, 30 November 2007 |
Lansing impasse on taxes irks firms
The Detroit News, Nov. 30
Michigan business leaders watched with growing horror Thursday as the
hoped-for repeal of a new tax on services skidded toward tonight's midnight
deadline with no final legislative action in sight.
Although back-channel negotiations were continuing, no House session or
formal talks were scheduled or being held late Thursday, continuing an impasse
that threatens to put in place the 6 percent sales tax on a bizarre array of
services starting Saturday.
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