By ELIZABETH DANEFF
Capital News Service
LANSING — Northern Michigan manufacturers can expect the next Single Business Tax cut to take effect as scheduled, a trade association reports.
The state’s budget crunch led manufacturers in early January to fear that the Rainy Day Fund would dip below $250 million, freezing the tax rate at 1.9 percent.
To the surprise of many, Gov. John Engler’s 2003 budget left $256 million in the Rainy Day Fund, barely missing the automatic trigger.
The SBT is set to drop to 1.8 percent on Jan. 1, 2003.
Chuck Hadden, vice president of government affairs for the Michigan Manufacturers Association, said continuing the 23-year-long phase-out plan is crucial for the survival of many Michigan firms.
“It’s extremely important in these economic times not to punish businesses with an unfair tax,” Hadden said. “It’s unfair for smaller businesses because there’s so many forms involved. You have to fill out several forms just to find out if you owe the state money.
“To pull the rug out from under manufacturers at a time when they’re trying to recover from an economic downturn is counterproductive. It also doesn’t improve Michigan’s current position as the fifth-largest in corporate taxation in the nation, making business retention and attraction more challenging.”
Mick Clark, co-owner of Genesis Engineering & Technology Inc. in Interlochen, said if a freeze is put on the SBT, his company will be forced out of business.
“It’s like the straw that broke the camel’s back,” Clark said. “We’re operating on a 5 percent margin, leaving us teetering on the edge. Most Great Lakes manufacturers operate on a 10 to 12 percent margin.”
Clark’s 12-man firm has been in business seven years. The company makes die cast molds.
According to the MMA, manufacturers contribute more than $2 billion annually to the SBT, more than any other industry in the state. A freeze could cost manufacturers almost $120 million, it said.
Tricia Kinley, director of tax policy and economic development for the Michigan Chamber of Commerce, said continuing the SBT rollback is necessary for job growth in Michigan.
“The SBT is unlike any other state tax. The value-added tax is very expensive for businesses that have to pay it,” said Kinley. “Phasing it out is so important to the health of Michigan’s tax climate and it keeps companies in a position to create more jobs.
“State government has ample room to cut spending and improve efficiencies.”
Sen. Majority Leader Dan DeGrow has proposed changing the law so the tax cut would go through no matter how much was available in the Rainy Day Fund.
Aaron Keesler, DeGrow’s press secretary, said now is not the time to delay a scheduled tax cut. “When we’re in a recession and people are being laid off, it’s the worst time to delay a tax cut,” Keesler said. “Businesses are laying people off just to survive. Increasing a tax that businesses didn’t budget for would only add to the problem.”
David Smith, owner of Traverse City-based Innovative Millworks, said the business tax costs manufacturers extra money that should be put back into the economy to help companies succeed.
“Money needs to be put back into people’s wallets so they can spend it, and in turn help get the economy rolling again,” Smith said. “The last thing businesses large and small need is another tax burden, especially when people are going out of business.
“I’ve only been in business making counter-tops for two years, but the weak economy is starting to trickle down to me.”
© 2002, Capital News Service, Michigan State University School of Journalism
By ELIZABETH DANEFF