Tax Issues Front and Center on First Days of 2017-18 Legislative Session

January 17, 2017

The Michigan Legislature has barely begun the 2017-18 session and already we have some key topics that members should be aware of! Alarm bells are starting to ring at Michigan Chamber and staff have taken action and assumed a leadership role in protecting the interests of job providers and taxpayers.

In the first week, we are already battling the following: 

Income Tax

Both the Michigan House and Senate are looking at income tax reductions and, more specifically, full elimination. House Bill 4001 was introduced to phase-out the income tax by 0.1/year and a Senate member will likely introduce a different phase-out this coming week. The Michigan Chamber applauds any legislator who wants to make Michigan more competitive, but we will work to ensure that any plan is not just a tax shift but rather true tax reform benefiting taxpayers.

Indeed, other members of the Michigan House seem to think that Michigan should go in a totally opposite direction and increase tax collections. House Democratic Leader Sam Singh suggested to the media that he does not think job providers and high-income wage earners are paying enough tax in Michigan. In the past, these were code words for imposing a graduated income tax. A graduated income tax would be devastating for Michigan job providers and would send a horrible message about affordable living in Michigan.

Sales Tax On Services

During last week’s State Revenue Estimating Conference, officials from Gov. Snyder’s Administration started laying the groundwork for a potential expansion of sales tax to services! The Michigan Chamber led the fight in 2007 to repeal former Governor Granholm’s job-killing plan to expand sales tax to services and then continued the fight against Michigan Treasury’s unauthorized attempt to apply sales tax to services accessed through the “cloud.” But sometimes, bad proposals have a way of coming back to life!

In the January 16th edition of The Detroit News, the State Treasurer made it clear that the Administration is certainly contemplating a sales tax increase in this manner. Ironically, the article suggests that sales tax revenues are “stagnating,” while simultaneously showing projected growth of nearly $1 billion over a seven-year period!

So, whether your business provides a service to customers (in which case you’d need to charge sales tax) or whether you purchase services (in which case you’d be charged sales tax), you need to be aware that these proposals are being floated in Lansing.

The Michigan Chamber will fight hard against unnecessary tax increases and be diligent in holding state government accountable to taxpayers.

City Income Tax 

Last week, House Bill 4029 was re-introduced to give authority for Treasury to conduct enforcement of Detroit’s City Income Tax. The Michigan Chamber is strongly opposed to mandates on suburban employers to be forced to collect and remit city income taxes for a city to which they have no connection.

Having the state conduct enforcement is more palatable than imposing a mandate on suburban employers. However, of significant concern with House Bill 4029 is the requirement to implement promulgated rules as part of the process. This appears to be a smoking gun that city officials will try to sneak around the legislative process and come back at a later date to push for mandated withholding through the administrative rules process. This is exactly the type of approach President Obama took when foisting burdensome regulations on unsuspecting employers.

The Michigan Chamber will continue to fight aggressively against any proposal to shift city government responsibilities onto employers.  

For information on these, or other tax-related issues, please contact Tricia Kinley at tkinley@michamber.com.