New state tax has mixed impact

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When Adam Seyburn, an owner of Collegeville Textbook Company, 321 E. Grand River Ave., first heard about the elimination of the Michigan Business Tax, he hoped the change would translate into a smaller bill owed to the state government.

But after running through the numbers, his hopes were dashed.

“When I initially heard about it, I was hoping it would translate into a large tax break for us,” Seyburn said. “But I don’t think that’s going to materialize.”

As the elimination of the Michigan Business Tax, or MBT — one of the most touted items by Republicans in this last budget cycle — goes into effect in time for tax season, small businesses in East Lansing are seeing mixed impacts.

While the MBT’s elimination, which translated to a $1.7 billion tax cut for businesses, might prove advantageous for certain businesses, some small business owners have said the shift to a 6 percent flat tax will go unnoticed or have negative effects.

“For a lot of our downtown businesses, I don’t see it having a dramatic impact,” East Lansing Planning and Community Development Director Tim Dempsey said. “In my eight years in the city, I have never heard anyone mention the Michigan Business Tax as being a problem.”

Dempsey said many businesses already were exempt, as they were below the revenue threshold where the tax applied.

While the MBT was a more complex algorithm that primarily calculated the tax rate based on a businesses’ sales, the new tax calculates the rate based on profit. Republicans have said the change will be more efficient and less complicated for businesses, paving the way for growth on Michigan’s main street.

But in Seyburn’s case, it doesn’t make much of a difference. Still, the switch could help a struggling business instead of expanding like Collegeville, as taxes would lower as profits do, Seyburn said.

“They’re right about that, it is kind of a mess to calculate,” Seyburn said. “But ultimately you’re just talking about vague estimates you’re making every month.”

Kenny Shukeir, owner of SIX Lounge Hookah & Smoke Shop, 400 Albert Ave., said the change actually will hurt his fledgling business, which opened its doors for the first time last night.

Shukeir said constant changes to the tax code have made it hard to do business, as he now has to pay higher taxes and spend more time figuring out a new system.

“(The laws are) different, every year it gets worse and worse,” Shukeir said. “It’s actually making it really, really tough.”

Although it might not get as much revenue for the state government in the short term, the new system will pay off in the long run, said Doug Roberts, Director of MSU’s Institute for Public Policy and Social Research. Once the economy gets better and profits rise, the tax will rake in more money for the government than the MBT, Roberts said.

Gov. Rick Snyder defended the tax removal in last week’s State of the State speech.

“The (previous) Michigan Business Tax was just plain dumb,” Snyder said in the speech, calling it a “job killer.”

Democrats have decried the cut’s balance with cuts to education and pension taxes, while Republicans have stood by the change, as the governor’s new budget proposal will be unveiled next month.

“That’s just not acceptable. That’s no way to turn Michigan around,” State Sen. Minority Leader Gretchen Whitmer, D-East Lansing, told The State News of the planned elimination after Snyder took office.

_Staff writer Beau Hayhoe contributed to this report. _

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