GRAND RAPIDS — The Grand Rapids Area Chamber of Commerce has produced a plan to replace the state’s sun-setting Single Business Tax and provide for the elimination of the Personal Property Tax.
The result of a year of research by the chamber’s Tax & Regulatory Affairs Committee, the plan calls for a uniform 0.75 percent tax on gross profits, tentatively known as the Michigan Business Activities Tax, with a $150 flat fee option for filers with less than $350,000 in gross revenue.
Taxable activity is defined as Michigan sales or service revenue, minus the cost of tangible personal property for the purposes of resale, manufacturing, leasing or the cost of funds for financial institutions.
While the majority of recent political attention has gone to the SBT, the chamber recently launched a regional campaign against the PPT, a tax which many local firms, particularly manufacturers, view as an even greater deterrent to investment than the value-added SBT.
The plan calls for full elimination of the PPT, suggesting a single low rate applied across all business sectors. The suggested 0.75 percent rate would provide a 10 percent decrease in total tax revenue over the current structure, removing the $2.1 billion SBT and $1.8 billion PPT (totaling $3.9 billion) and replacing it with the $3.5 billion BAT. The greatest impact would be felt by small businesses, which would be virtually free of state corporate taxes, according to the chamber’s formula.
To accomplish this, the chamber has proposed reductions in state spending through Medicaid reform and the creation of incentives to promote government and school consolidation.
“We must make our state a better place to do business, and this plan is an exciting step toward that goal. It is simple, has a low rate, does not punish struggling businesses, and lessens the burden on our manufacturers, who invest heavily in equipment and machinery,” said Jeanne Englehart, chamber president, in a prepared statement.
“Our proposal will help Michigan move from having one of the most onerous tax climates in the country to one that encourages businesses to locate here. We have begun educating our state leaders on our plan, in an effort to work together in creating an environment that gives our businesses a competitive advantage in the global marketplace.”
The chamber program also calls for the preservation of existing tax credits as applicable to the new tax. Future development incentives would be delivered on a cash grant basis.
Bill Morgan, a senior accountant at DDM PC CPA in Grand Rapids, which principally serves small to medium-sized businesses and manufacturers, agreed with the chamber plan in principle, citing a definite need to eliminate the PPT.