The debate over Michigan’s Single Business Tax (SBT) is one of the hottest in the state right now, with Oakland County Executive L. Brooks Patterson leading a petition drive to eliminate the SBT in 2007. Yesterday, the State House Tax Policy Committee approved a bill that would do the same thing.
Many of the issues involved in the SBT debate are fiercely debated - opponents say that it’s confusing and makes Michigan a less attractive place for job creation and retention, while supporters argue that Michigan’s business environment is in the top half nationally, especially for small businesses, where we rank in the top five. Despite the disagreement on many issues, however, two things are clear. First, scrapping the SBT in 2007 creates a $1.9 BILLION budgetary black hole. Second, no one pushing the measure has produced any plan - either through additional spending cuts or tax restructuring – to pay for it. And as long as those facts remain unchanged, any attempt to end the SBT in 2007 remains fundamentally irresponsible.
To be clear, there are good reasons for reforming the SBT. One principle complaint is that it is difficult for employers to know exactly what their tax burden will be. For businesses that need to be able to accurately predict their tax burden and other expenses, this is a valid complaint, and it may be worth moving toward a more transparent business tax structure. This may mean going back to a corporate income tax, similar to that used by the federal government and a number of other states.
The key in all of this, however, is that such tax adjustments need to be responsible, and in a budgetary climate as tight as this one, that means that any reform must be revenue neutral. The $1.9 billion dollar shortfall that would result from ending the SBT in 2007 would mean a 21.4% cut in every program funded by general revenue, if such an across-the-board cut was legal (which it isn’t). Schools – cut by 21.4%. Prisons – cut by 21.4%. Funds for environmental cleanup and protection – cut by 21.4%. Community health and human services – cut by 21.4%. Higher education – cut by 21.4%.
The only alternative to these cuts are tax increases elsewhere, from the personal income tax to the sales tax. (Either that, or higher tuition for parents sending their children to Michigan universities and lower quality public services, both of which would hurt our ability to develop the healthy, well-educated, stable workforce needed to compete in the 21st Century.) Remember, the SBT is the only tax on businesses in the state, and the proponents of eliminating the SBT have proposed no other business tax model to compensate for this budgetary shortfall.
As Democrats, we need to oppose the GOP plans to eliminate the SBT without any way of paying for it. Our public services are stretched too thin as it is, and taking an additional $1.9 billion from general revenue hamstrings our ability to make the necessary investments to compete in the years to come. We cannot build a sustainable Michigan without investment in early childhood education, world-class public schools, top-flight research universities, a healthy workforce and a pristine environment.
But as Democrats we also need to do more than simply oppose this irresponsible proposal. As the party of ideas, we need to shape Michigan’s forward looking agenda. We’re a lot more credible in opposing Republican irresponsibility if at the same time we’re putting forward a responsible reform agenda that addresses the problems with the SBT without starving our state of the resources we need to be competitive – now and into the future. That’s what I intend to do, and I welcome your ideas on how best to do it.
