A bit of business-class warfare broke out last week.  During testimony before the Senate Finance Committee on House Bill 5408, Chair Nancy CASSIS pounded out the theme that small and especially mid-size businesses would be the biggest losers in replacing the doomed service tax with a surcharge on the Michigan Business Tax (MBT). 

House Bill 5408 is favored by a host of organizations whose members testified at the four-hour session last week Tuesday, including the Big Three, Detroit Regional Chamber of Commerce and Michigan Manufacturers Association (MMA).  The bill would include a 33 percent surcharge on the MBT capped at $2 million — comparatively good news for big business — with no sunset.  So far, the Senate passed Senate Bill 0845 to delay the service tax implementation from December 1 to December 20 and passing an outright repeal in Senate Bill 838 without revenue replacement.

The administration of Governor Jennifer GRANHOLM has made it clear that repeal without revenue is a non-starter.

The business community is definitely united on getting rid of the service tax but unsure on how to replace the lost revenue.  The three Republicans on the Senate Finance committee zeroed in on the fact that manufacturers would go from having a $361 million liability under the repealed Single Business Tax to an estimated $260 million tax credit with the restructured MBT.  The automakers disputed the numbers.

Hopefully this week there will be a consensus on what to do with the Use Tax on Services.  Time is running out.  The new tax is scheduled to go into effect on December 1st.