According to a report in MIRS News (12/04/07);  "Two days after the Michigan Manufacturers Association (MMA) successfully led the legislative drive to kill the 6 percent use tax expansion to services in exchange for a 21.99 percent surcharge on the Michigan Business Tax (MBT), the MMA's lobbyist Chuck Hadden said their goal is to kill the surcharge."

Most business group looked at the MBT surcharge as the lesser of two evils.  However, now that the surcharge is reality, many are having second thoughts. 

The effective rate of the replacement is much higher than the statutory 21.99% rate for taxpayers with compensation in Michigan, purchasing assets for use in a Michigan business activity or incurring research and development costs in Michigan. 

The rate of the compensation credit is reduced from 0.370% to 0.296% for 2008.  The investment tax credit rate is reduced from 2.9% to 2.32% for 2008.  The rate for the research and development credit was reduced from 1.9% to 1.52% for 2008.  After 2008, the rates return to the original percentages. 

In addition, the limitation on the combined compensation credit and the investment tax credit has been reduced from 65% to 50% for 2008 and then 52 % for years after 2008.  The combined research and development credit when added to the compensation credit and the investment tax credit cannot exceed 65%.  Previously the limitation was 75%.

It is expected the Michigan State Chamber of Commerce will be the next group to call for a repeal of the surcharge.  Based on current law it will be with us for ten years.