LANSING — A new proposal to lower Michigan's sales tax and expand it to services is edging onto the Capitol landscape, with House Speaker Andy Dillon saying he supports the direction it takes.
The plan, introduced last week by State Rep. Mark Meadows, D-East Lansing, would lower Michigan's 6 cent sales and use taxes to 5 cents and extend them to services, raising money to help fund revenue sharing, K-12 education and repeal of the Michigan Business Tax surcharge.
Meadows said he is putting forth the plan — House Joint Resolution KK and House Bills 5527-5529 — not as a measure to shore up the still-to-be-inked fiscal 2010 budget but to start the discussion on Michigan revenue restructuring that's needed long term to avoid continual budget crises and cuts.
“It is part of the post-budget world that we're trying to create, which hopefully includes substantial tax reform for the state of Michigan. So we don't have to deal with this year after year,” Meadows said.
Dillon, D-Redford Township, said in a statement that he is still reviewing the proposal but supports its “general direction. I believe we will see a coalition begin to form in support of comprehensive tax reform in the weeks and months ahead.”
The ideas in Meadow's proposal are among those that have floated around Lansing in behind-the-scenes business-community talks on tax reform.
Business Leaders for Michigan, the newly formed statewide CEO group, has voiced support for extending Michigan's sales tax to consumer services and lowering the 6 percent rate to an undisclosed level, with business-to-business services and some other items excluded from tax.
At a Lansing news conference in September, David Brandon, chairman of the group and chairman and CEO of Domino's Pizza Inc., said polling the group has done indicates “people don't think it's wrong that certain services be taxed.”
But the group isn't yet weighing in publicly on Meadows' plan. Asked last week for comment, President and CEO Doug Rothwell said he did “not wish to talk about any tax proposals until the budget is resolved.”
Meadows' proposal would exempt business-to-business transactions, services provided by nonprofits, physician services and educational services. Meadows said the latter, by reference, would probably exclude taxing high school and college athletic events, although professional sports and other forms of entertainment would be taxed.
Brad Williams, director of government relations for the Detroit Regional Chamber, said the chamber will participate in conversations on the plan should it move forward, but the group's priority is to see structural reforms to address the state's budget problems “before we talk about raising taxes.”
He also said that while the chamber supports relief from the nearly 22 percent surcharge on the MBT, trading “surcharge relief for a brand new service tax just isn't a good deal.”
It was unclear late last week how much money the proposal would raise, but it is expected to provide an additional $673 million in K-12 funding and $522.5 million for revenue sharing, as well as funds that would go toward repealing the MBT surcharge.
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