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Michigan Business Tax Policy. ASPA/MICAP Conference September 30, 2011. History of Michigan Business Taxes. Business Activities Tax- 1953-1967 Corporate Income Tax- 1967-1975 Single Business Tax- 1976-2007 Michigan Business Tax- 2008-2010 Corporate Income Tax- 2012-?. Advantages of SBT.

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michigan business tax policy

Michigan Business Tax Policy

ASPA/MICAP Conference

September 30, 2011

R. Kleine 9/2011

history of michigan business taxes
History of Michigan Business Taxes
  • Business Activities Tax- 1953-1967
  • Corporate Income Tax- 1967-1975
  • Single Business Tax- 1976-2007
  • Michigan Business Tax- 2008-2010
  • Corporate Income Tax- 2012-?

R. Kleine 9/2011

advantages of sbt
Advantages of SBT
  • Stable- largest decline was 14% (1981)
  • Treats labor and capital equally
  • Does not discriminate based on type of organization
  • Provides good measure of benefits received by business from public services
  • Low rate minimizes interference with business decisions

R. Kleine 9/2011

disadvantages of sbt
Disadvantages of SBT
  • Complicated
  • Unique in U.S.
  • Tax on compensation not understood
  • Subtractive method of calculation would have likely reduced criticism

R. Kleine 9/2011

sbt as private gdp
SBT as % Private GDP

R. Kleine 9/2011

advantages of mbt
Advantages of MBT
  • Favorable treatment for small business (gross receipts $20 million or less)-1.8% of business income
  • Stable (profits 30%, gross receipts 70%)

R. Kleine 9/2011

disadvantages of mbt
Disadvantages of MBT
  • Complicated- too many credits
  • Higher rates than SBT- 6% on business income compared with 1.9% for SBT
  • Surcharge very unpopular

R. Kleine 9/2011

advantages of corporate income tax
Advantages of Corporate Income Tax
  • Widely used
  • Business only pays when profitable

R. Kleine 9/2011

disadvantages of corporate income tax
Disadvantages of Corporate Income Tax
  • Unstable- down 34% in 73-75 period
  • Favors labor over capital
  • Discriminates based on form of organization
  • Penalizes efficiency
  • Subject to manipulation- voluntary tax
  • Rate more easily increased than SBT or MBT
  • 95,000 fewer businesses pay than under SBT and MBT-41,000 now pay

R. Kleine 9/2011

business tax options
Business Tax Options

R. Kleine 9/2011

business tax cuts will not create many new jobs
Business Tax Cuts Will Not Create Many New Jobs
  • Business tax cuts offset by tax increases on individuals and families and spending cuts
  • Most of tax relief goes to non-mobile retail and service businesses- only 18% to manufacturers
  • Business taxes much lower than in 1990s
  • Business taxes are only 5% of state GDP and tax cut amounts to only 0.5% of GDP

R. Kleine 9/2011

business tax cuts by sector
Business Tax Cuts by Sector
  • Services- $575 million
  • Prof.& Tech services- $181 million
  • Manufacturing- $279 million
  • Retail Trade- $153 million
  • Wholesale trade- $139 million
  • Real Estate- $110 Million
  • Construction- $90 million
  • Finance & Ins.- $75 million
  • Other- $112 million

R. Kleine 9/2011

slide14

Corporate Profits Up Sharply in Last Three Years

2011 Q2: $1,934

Source: Bureau of Economic Analysis

contact
Contact

Robert J. Kleine

Great Lakes Economic Consulting

www.greatlakeseconomics.com

9/2011

R. Kleine 9/2011