Extremist business group seeks to wreck budget solution

Does this mean... (0.00 / 0)

The legislature can use this to put a progressive income tax on the ballot?

Putting conservatives in charge of our government makes about as much sense as GM hiring a CEO who hates cars.

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by: djtyg @ Wed Oct 03, 2007 at 08:07:18 AM CDT

No graduated income tax (0.00 / 0)

Michigan Const. 1963, Art. IX  § 7

No income tax graduated as to rate or base shall be imposed by the state or any of its subdivisions.

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by: William Allen Simpson @ Wed Oct 03, 2007 at 08:26:29 AM CDT

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I know... (0.00 / 0)

But if it's put to an election, it can be changed.  I'm wondering if these extremists can be used to put it on the ballot where other attempts to do so have failed in the past.

Putting conservatives in charge of our government makes about as much sense as GM hiring a CEO who hates cars.

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by: djtyg @ Wed Oct 03, 2007 at 08:34:00 AM CDT

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Wonderful... (0.00 / 0)

I wonder what kind of leg they'd have to stand on if they'd just extended taxed all services, rather than leaving loopholes for things like golf course greens fees.

Among the Trees

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by: Eric B. @ Wed Oct 03, 2007 at 09:44:18 AM CDT

Extremist? (0.00 / 0)

The blogger above calls small business interests extremist.  Maybe the Small Business Association doesn't support Democrats but small business has always been part of the Democratic party constituency.

Democratic activists may call small business people extremist, but it will be at your own peril. 

Do you really think that the Legislature and Granholm could take the course of action they did on the service tax and there would not be serious and tough blow-back?  Please know that the blow-back that will occur on this issue will threaten the existing Democratic house majority position, any prospects for making a change in the Senate and maintaining the governor's chair in Democratic hands.

Please take a walk in the shoes of sole proprietors and small businesses before you make your judgements on the service tax and calling small business people extremist.

Personally, I strongly support an increase in the income tax.  If memory serves me correctly, it was once as high as 4.6%.  I wouldn't mind paying that again.  I wouldn't mind paying a 7-8% merchandise sale tax, and would support that also.

However, the 6% service tax is an anti-competitive small business job killer.  It will not only discourage small businesses in Michigan, it will drive the ones we have out of the state.  The taxing of business to business consulting services means any Michigan consulting business will be at a disadvantage to out of state businesses offering the same services.  And for the typical ma and pa small businesses, that 6% hit can wipe them out completely.

And the irrational manner in which some service business were taxed and not others - Granholm and the dems picking winners and losers in the small business community -- is going to drive the passions hard to repeal this action. 

As a sole proprietor consultant this long-time Democrat will be signing and circulating the first petition for a referendum to get this on the ballot.  Just because Jennifer thinks that she can ram this down the throats of the small business community doesn't mean it is going to stand.  Michigan progressives and liberals should think long and hard about whether they will stand in the way of the blow-back that is going to happen on the 6% service tax.

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by: asagady @ Wed Oct 03, 2007 at 10:31:55 AM CDT

Um... (0.00 / 0)

I believe the blogger was suggesting that this particular group was extremist...

Unless you are suggesting this group represents all small businesses in the state of Michigan...

Why do you have such a need to make a mountain out of a mole hill?

It wouldn't be because you have an awful lot of straw lying around and a desire to make a man with it now would it?

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by: Nazgul35 @ Wed Oct 03, 2007 at 11:18:41 AM CDT

[ Parent ]

On another note (4.00 / 1)

who are you kidding? This isn't a tax on small businesses...it's a tax on the people who use your services.

You won't hesitate to pass these costs on to your customers, so spare me the histrionics.

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by: Nazgul35 @ Wed Oct 03, 2007 at 11:20:26 AM CDT

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You're pretty naive.... (0.00 / 0)

You're pretty naive about what it takes to run even a small business these days.  As a sole proprietor consultant in my field I compete not only with other sole proprietors and larger consulting firms in Michigan, but others similarly situated throughout the US.  The vast majority of states do not charge service taxes on consulting. 

Since about 95% of my business is from clients out of state I am automatically put in a position of disadvantage in competing with others who do not have to charge a service tax.  Many of my clients are non-profit organizations and cash strapped entities. Virtually all of my project-related contracts require a ceiling on maximum charges under the contract to get the project done.  The net effect of charging a 6% tax in such business to business services will be either smaller contract ceilings or me having to charge less.  That will make it, in essence, a 6% tax on my gross and not on my clients if I'm going to compete with others who don't have to charge a tax.

This pressure is also on top of a 19% increase in health insurance rates just enacted by Blue Cross in Michigan.

Consulting service businesses already pay income taxes on Schedule C and related state income taxes.  The larger ones will also pay the new business taxes.  Saying that somehow Michigan is not already taxing services is simply not true.

Jenny and the dems 6% service tax remains a job and business killer.  The blow-back on this is going to reach hurricane strength.  Watch and learn.

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by: asagady @ Wed Oct 03, 2007 at 11:59:49 AM CDT

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I've already informed my clients (4.00 / 2)

that some of my services are now taxed at 6%.  I haven't raised my rates since 2000, so I'm not hearing any complaints.

The bottom line with consulting is if you do good work, people will pay to keep you.  You're not selling services, you're selling yourself as an expert who gets the job done, on time.

I didn't tell my clients (because it would be bad salemanship) that we've both been getting a free ride on business taxes in Michigan all these years.  I've been well under the SBT and now MBT ceiling because I'm--guess what?--an independent business person.  Why, exactly, should small services providers be essentially tax-exempt?

Jenny and the dems--sounds like a British Invasion band from the 60s.  Also really poor framing.  We wanted 2%.  6% was what you got because you didn't hire lobbyists to grease the palms of the republican house members to keep them from throwing you under the bus in order to get a deal.

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by: eartha651 @ Wed Oct 03, 2007 at 13:14:00 PM CDT

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Jumping the gun? (0.00 / 0)

The tax hasn't taken effect yet. Should small businesses be charging for a tax that hasn't gone into effect?

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by: NoviDemocrat @ Wed Oct 03, 2007 at 16:24:23 PM CDT

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January 1 (0.00 / 0)

But I noticed them this week.

Maybe that was jumping the gun if the thing is recalled or repealed or whatever.  I hope not--even if it's not the most well thought out solution, let's get to work coming up with a better one, instead of stomping our feet and screaming I WON'T EAT MY BROCCOLI.  Living in this state is getting embarrassing.

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by: eartha651 @ Thu Oct 04, 2007 at 08:22:24 AM CDT

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Correction (0.00 / 0)

December 1

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by: eartha651 @ Thu Oct 04, 2007 at 20:05:49 PM CDT

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As a consultant I'll probably be paying this tax too (4.00 / 3)

And I don't like it, I admit. Who likes taxes? But Michigan is moving away from a manufacturing economy to a service-based economy. If we don't change our tax structure, then the entire cost of Michigan's services will be borne by individual taxpayers. And that's not fair and not right. We all need to pay our share, including businesses of all stripes.

That having been said, this 6% tax on some services and not others is a pretty chintzy solution. But maybe it takes baby steps, and eventually will be broadened to be more fair later.

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by: lpackard @ Wed Oct 03, 2007 at 11:27:44 AM CDT

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News flash, chief... (0.00 / 0)

Granholm's ORIGINAL PLAN was a 2% service tax ACROSS THE BOARD.

Man, I'm getting sick of hearing "Granholm did this!"  Her plan was totally different when she proposed it back in February.

Now instead of that, we had people screaming "no new taxes!" up until the last minute, despite the fact that they knew they had to pass one anyway.

So instead of what Granholm proposed, we got a 6% tax on some services because people couldn't put aside partisan politics and made a tax code that's best for the people.  And I doubt lobbying played a major role in this, because last I checked, GM is paying a huge chunk out of this whole deal.


Putting conservatives in charge of our government makes about as much sense as GM hiring a CEO who hates cars.

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by: djtyg @ Wed Oct 03, 2007 at 12:24:50 PM CDT

[ Parent ]

Right on except (0.00 / 0)

about the lobbyists.  I remember reading on Sunday afternoon that the house was keeping mum about which services would be taxed until the last minute because they were afraid a lobbying firestorm would kill the deal.  Apparently it almost did, because golf courses were supposed to be taxed and ended up squeaking out, and a couple other services as well.

DJ, can you provide more info on the impact of the service tax on GM?  I'm too darn lazy to look it up myself :-)

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by: eartha651 @ Wed Oct 03, 2007 at 13:17:01 PM CDT

[ Parent ]

Here's the link... (0.00 / 0)

http://www.freep.com...

The Big 3 are paying about 1/3rd of the tax.  Maybe their lobbyists were asleep at the wheel?

Putting conservatives in charge of our government makes about as much sense as GM hiring a CEO who hates cars.

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by: djtyg @ Wed Oct 03, 2007 at 23:53:29 PM CDT

[ Parent ]

Not irrational, but impossible to comply with. (0.00 / 0)

There was definitely a lot of thinking behind which services were included in this tax, and which services were excluded.  The official statement I have heard is that the legislature tried to avoid taxing 'essential services.'  Having spent the last day actually reading through the law, I can say that complying with it as either a consumer taxpayer, or a business owner, is going to be a nightmare.  The law cites to categories of industrial classification codes, many of which might apply or not apply to a particular service.  I have a table listing these services here on my blog.  Several businesses will be providing mixed services to the same client (like "consulting," which is covered and "engineering," which is not).  They are going to have to do complicated recordkeeping to comply.  Frankly 6% across the board on all services would have been easier, for small business.

As noted above, this really hits business-to-business services the hardest.

Carol Shepherd
Arborlaw PLC, Ann Arbor, MI

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by: arborlaw @ Wed Oct 03, 2007 at 19:08:35 PM CDT

[ Parent ]

Not impossible, but complicated. (0.00 / 0)

You make a good point, arborlaw, about how difficult this process could be.  However, in another thread (sorry, I can't find the link right now) we realized that if you simply Google (or Ask or whatever) "NAICS 2007" you can easily look up your codes and tie them to the legislation.

I'm an independent business owner/consultant and I've already notified my clients that I'll be adding the 6% tax when it goes into effect.  My response thus far?  A big shrug.  My clients value my work and understand that in order to have my skills and talents working for them, they have to pay for it. 

The application methodology (which NAICS codes are taxed and which aren't) is what's suspect here.

Do stupid people know they are stupid?

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by: JPowers155 @ Thu Oct 04, 2007 at 16:02:50 PM CDT

[ Parent ]