[tuebor]

LANSING -- Gov. Jennifer Granholm said today she would support a graduated state income tax in return for eliminating a much-criticized surcharge in the Michigan Business Tax.

Granholm: Graduated income tax a possibility | Freep.com | Detroit Free Press (http://www.freep.com/article/20090317/NEWS06/90317045/1008/NEWS06/Granholm++Graduated+income+tax+a+possibility - broken link)

~~~

A Michigan State University economist Monday called for a graduated income tax to replace the state's new and much-hated Michigan Business Tax and the current onerous surcharge.

WWJ Newsradio 950 - Graduated Income Tax To Replace MBT? (http://www.wwj.com/Graduated-Income-Tax-To-Replace-MBT-/3819077 - broken link)

[MI-IRISH]

wow,hmm,michigan business tax....you think something like this would have been thought of sooner....michigan political elite on doing business the right way 1) light firecracker 2)close hand around lit firecracker 3)bang...ouch that hurt 4)lets do it again and maybe something different will happen........bang

[tuebor]

I'm leaning toward the MSU prof's plan, but either of these plans would be an improvement over our current tax structure. A progressive tax is long overdue.

[tuebor]

I heard today that the projected state budget deficit for next year will exceed a billion dollars. A progressive income tax seems to me the most straightforward way to deal with the structural deficit and also do something about those business taxes that so many people complain about.

[dagnabit9]

Let's see. Replace the flat tax with a graduated tax so the "ones that make more, pay more". Sorry, but with a flat tax, those who make more DO pay more. 4.35% of $100,000 is more than 4.35% of $35,000. All the graduated tax will do is "redistribute the wealth" - take more from those who make more and give it to those that pay less or nothing at all. (See the current US income tax tables.)

[tuebor]

Now that the GOP has taken over state gov't, I think this topic deserves a bump. Could Rick Snyder support replacing the business tax with a progressive income tax? Could he get the legislature to go along with such a plan?

Only Nixon could go to China...

[Cliffie]

What has Snyder said about taxes in general?

[tecpatl]

From a Detroit News interview with Snyder, published in late July.

Q . The Business Leaders for Michigan has a very specific plan to return Michigan to competitiveness. Do you support that plan in its entirety or are there elements of it you don't like and elements you do like?
A . Most of it's a well-done plan. There are a few differences. They talk about reducing the Michigan Business Tax. My view is it simply needs to be eliminated. I proposed an alternative for replacing it with a corporate income tax of 6 percent. Very simple. (With) the Michigan Business Tax, you may have a situation where you make no money and you can have a significant tax liability. Second, you have two different companies and two different industries that make the same amount of money. One of those companies could pay as much as four or five times in tax liability as the other company. It's like a blinking red light -- job killer, stay away.


From The Detroit News: Snyder: We need tangible, real results | detnews.com | The Detroit News

[michigan83]

Originally Posted by tecpatl

From a Detroit News interview with Snyder, published in late July.

Q . The Business Leaders for Michigan has a very specific plan to return Michigan to competitiveness. Do you support that plan in its entirety or are there elements of it you don't like and elements you do like?
A . Most of it's a well-done plan. There are a few differences. They talk about reducing the Michigan Business Tax. My view is it simply needs to be eliminated. I proposed an alternative for replacing it with a corporate income tax of 6 percent. Very simple. (With) the Michigan Business Tax, you may have a situation where you make no money and you can have a significant tax liability. Second, you have two different companies and two different industries that make the same amount of money. One of those companies could pay as much as four or five times in tax liability as the other company. It's like a blinking red light -- job killer, stay away.


From The Detroit News: Snyder: We need tangible, real results | detnews.com | The Detroit News

I read the transcript of that interview. Man... I hope he is able to accomplish those things. I am with this guy on everything 100%.

[tuebor]

A corporate income tax? Great, but -- wow, that really is Nixon going to China. A Democrat would be called a communist and a job-killer if he proposed that.

The interviewer points out the problem with replacing the business tax with a flat 6% corporate tax:

"So, you've taken a billion and a half out of the revenue stream for the state, which has already gone down from $10 billion to $7 billion (in the general fund budget). That would take it down to $5.5 billion. Can you run a state like this on $5.5 billion?"

From The Detroit News: Snyder: We need tangible, real results | detnews.com | The Detroit News

[Hey, cool, city-data auto-formats our citations now.]

Snyder's answers to this are cryptic, but it sounds to me like he wants to pay for that shortfall with cuts to education, public employees, and aid to local gov't. All three of those have already been cut to the bone.

Of the three, I would prefer cuts to local gov't, because local gov'ts can raise their own taxes, but this approach is regressive, because those communities with the greatest need have the least ability to raise funds.

(If we could undo the constitutional restrictions on how schools raise funds, then schools districts could also increase their revenues, but then we would have to deal with school system disparities again. But that's academic, because Prop. A is not going to be overturned in the near future.)

Let's hope Snyder is correct about the effects of his plan on the state's ability to attract new investment, and that business growth, along with improved sales and income tax revenues as the economy recovers, will make that hole in the budget go away. But that's not going to happen in the next year. So if Snyder's 6% corporate income tax plan goes through, we're still going to need to raise other state and/or local taxes, at least temporarily. A graduated state personal income tax would be the fairest way to do that, but if we can't have that, then we may have to accept a small increase in the flat personal income tax or the sales tax.

(There are other options. Snyder's plan is not revenue-neutral. It includes lower taxes for businesses. Another possibility would be to have a higher initial corporate income tax, and a smaller tax break for businesses in the short term. What if we start with a nearly revenue-neutral corporate income tax --7 or 8%?-- and guarantee that it will be gradually reduced to 6% over the next few years? If the economy recovers, other state revenues will increase during that time.)