MASSP News Center

SERVICE REPEAL/BUSINESS TAX SURCHARGE PASSES HOUSE

On a 58 to 48 vote the House passed HB 5408, legislation that would repeal the services tax adopted a few weeks ago and replace it with a surcharge on the Michigan Business Tax (MBT).Under HB 5408 the surcharge would be 32.9 percent through 2008, and fall to 23.7 percent thereafter. The legislation also includes a $2 million cap, to limit the amount that larger companies would pay.

The legislation holds the School Aid Fund harmless. The earmarking of revenue to the School Aid Fund would be adjusted in order to hold the SAF harmless from the switch from the services tax to the MBT surcharge. This would involve the additional earmarking of $205 million in FY 2008 and $250 million in FY 2009.

At this point the legislation does not have support in the Senate. Senate Republicans oppose HB 5408, primarily because it would be a permanent tax. In addition, the Senate Republicans say they want to take a look at some other possible alternatives as well. They will spend the next two weeks looking at alternative plans.

If the issue of the repeal is to be tackled; it has to be taken care of this month because the service tax is scheduled to be implemented on Dec. 1.