Effects of Mich. business tax explored, yet to be determined

By Pete Nichols (Last updated: 08/28/09 6:31pm) Although the proposed Michigan Business Tax is still several steps away from becoming full-fledged legislation, some organizations are trying to gauge the impact of what the new tax will mean for small businesses.

Groups, such as the Michigan Business & Professional Association and the Michigan Food and Beverage Association, sent out faxes Tuesday outlining some of the tax's features and requesting feedback from various businesses that would be affected by the MBT.

"We just wanted to give our members the information to hear different companies say, 'This is not good for me,' or 'This is good for me,'" said Bonnie Bochniak, government relations director for both organizations.

The proposed MBT is a replacement for the Single Business Tax, or SBT, which was repealed in November.

The MBT will be based primarily on a .76 percent tax of the difference between a business's sales and purchase of tangible property. The rest of the tax will consist of a 4.8 percent tax of the business's income.

Because of the complex nature of the proposed tax, it would be difficult for businesses to quickly understand how much the proposed MBT would affect them, Bochniak said.

"We're waiting to hear from them," she said. "We have to give them a couple of days to get back to us because they'd have to take (the information) to their accountant."

A business making less than $350,000 would have no liability under the MBT, thus benefiting small businesses that make less than that.

Aside from businesses, the state will benefit as well, said Terry Stanton, spokesman for State Treasurer Robert Kleine.

"About seven out of 10 businesses will see a tax cut, and that is a proposal that will spur job creation," Stanton said.

What sets the MBT apart and benefits small businesses, Stanton said, is businesses will only have to pay tax on the amount of revenue that exceeds the $350,000 threshold, rather than paying tax on the entire amount.

Under the SBT, if a business made more than $350,000 - even only $1,000 more - the business would have to pay a tax on the entire amount.

"It's phased-in liability," Stanton said. "Just because you went a little over the limit, you don't get whacked with the whole thing."

The phased liability of the tax would be beneficial, said Robert Beagan, manager of Bell's Greek Pizza, 225 M.A.C. Ave., although he said Bell's doesn't meet the threshold.

"It would lower our tax rate because if we made more than $350,000 - which we don't yet but hope to - it would lower our tax rate," he said.

Whatever the reaction from businesses, it's hard to determine what the effect of the MBT will be, Bochniak said.

"It's hard to say what's going to happen until it's in place," she said. "It's complicated. We just want it fixed."

Pete Nichols can be reached at nicho261@msu.edu.

Originally Published: 06/20/07 12:00am