As part of the deal to pass the school aid budget, the Senate also put together a plan to phase out the surcharge on the Michigan Business Tax (MBT) over three years. The plan has many parts to it is unclear what will happen in the coming weeks.
Recall that the surcharge imposes an additional 22% on a business’s MBT liability. Since its inception in the fall of 2007, repealing the surcharge has been one of SBAM’s top priorities to get the economy moving again.
The plan also includes another important SBAM priority by increasing and indexing to inflation the officer compensation threshold to qualify for the alternative profits tax. The alternative profits tax is a simpler and less expensive tax that many small businesses qualify for. It is based on a company’s gross receipts, their net profit, and what they pay the key officers of the company.
To pay for these changes, the plan as it passed the Senate would make a number of other changes including:
- Freezing the earned income tax credit (this is a credit for low income taxpayers) for one year;
- Reducing the film credit;
- Reducing the brownfield credit and;
- Allowing for a tax amnesty period for delinquent taxpayers.
Some of these revenues would also be used to supplement the School Aid budget.
The plan is not supported by Governor Granholm, and it is unclear what the House intends to do.