Posts Tagged ‘Michigan Business Tax’

Does that seem like a strange question? After all, in the current Michigan budget debate we hear often that Governor Snyder wants to give corporations a huge tax break on the back of middle class citizens with pensions.  And there is no doubt that with the elimination of the Michigan Business Tax many corporations will pay less in taxes.

But the question is still germane, and very important to understand. The point is that a corporation, regardless of the fact that it writes a check from its account once a year to pay the Michigan Business Tax, does not actually pay taxes. Consider the following from Uwe Reinhardt, a professor of economics at Princeton University:

… corporations cannot possibly pay the corporate income tax, because they are not human beings. Instead, that tax always is fully passed to one or all of three groups of human beings: to customers through higher prices, to shareholders through lower returns on capital, or to employees through lower take-home pay. Under fierce global competition, the potential of shifting corporate taxes to customers often is limited. Similarly, in a global capital market, the corporate tax cannot easily be shifted to capital owners who have the option of taking their capital elsewhere. Economists therefore suspect that the bulk of the corporate income tax is shifted back to the least global mobile target, the employees.

Take the example of Widgets, Inc. This a corporation formed though investments by Mom and Dad, Grandma and Grandpa and a 2nd mortgage on your house. You buy raw materials from vendors, and you and your employee make widgets. You hire a guy to sell and he pounds the pavement until you have some customers. Since your new ‘mouse trap’ take the world by storm, you start to make some profits. Being a wise old business person you realize that at the end of the year you are going to have to make a payment to the government on your profits. What should you do?

You could raise prices on your mouse trap, but the competition is already hard on your heels. You could ask your vendors to lower the price of raw materials, but you scouted the market and have the best deal out there already. Your relatives expect some payback on their investment, and the last thing you want to do is explain to your own family that you have lost the house because the business is too successful. Your sales person keeps bringing in more orders and you need to buy more machines to build more mouse traps, and purchase more raw materials. The only way to do it all and keep your new company growing is to hold down wages. Your employees, by not receiving a share of the company’s success, ultimately pay the corporate income tax. This explains why business owners hand out Christmas hams – they are thanking you for paying the Michigan Business Tax!

But seriously, it should be obvious that a corporation is simply a legal entity through which the business transactions of the company flow. A corporation can no more pay taxes than a widget machine, a desk, an adding machine can pay taxes. Yet these things comprise the tangible assets of the company.

The answer then to our original question is that you cannot give a corporation a tax break because you cannot collect taxes from a corporation.You can however give the employees of a corporation a tax break. And it’s about time that we do.

Governor Snyder presented his 156 page $47 Billion State Budget for 2012 on Thursday, February 17th.  Watch here as Governor Snyder discusses his proposal with Channel 7 anchor Stephen Clark, at length.  You might say, “If everyone’s complaining, it must be balanced.”

Download the Governor’s Budget plan here.

Click here to read the Governor's 2012 Budget Summary

There will be many news stories covering the governor’s proposed budget, of which we cannot present them all.  The links below are a few of the early reactions of the proposal.

Battle Creek Enquirer, Kalamazoo News Channel 3, Saginaw News Channel 5, and The Macomb Daily Newspaper

Certainly not subtle, State Senator Jack Brandenburg wants to stimulate Michigan businesses and grow jobs the old fashion way.  His plan to eliminate the Michigan Business Tax (MBT) entirely, competes aggressively with Governor Snyder’s alternative, as listed in his “Guide to Michigan Financial Health”. Click the link below to watch Senator Brandenburg make his case.

Governor Snyder plans to unveil his Proposed Budget on February 17th.

The Governor’s “Citizen’s Guide to Michigan’s Financial Health”

can also be reviewed and downloaded here.

Local Michigan Senator, Jack Brandenburg (new chairman of the Senate Finance Committee) is heating up the debate on Michigan’s Business Tax with his proposal to eliminate the tax entirely.

The Macomb Daily reports that Brandenburg has been floating the idea among the Lansing press corps and on Tuesday he said he is standing his ground. Eliminating business taxes would capture the attention of the nation’s business community and draw companies to Michigan, according to the Harrison Township Republican.

“What’s good for business is good for Michigan,” said Brandenburg, a longtime small business owner in Mount Clemens. “We have to send a message to the country that we have made up our minds to be business friendly. And we need to send a message that resonates as a bold stroke.”

Click Here for Governor Snyder's Proposal

Gov. Snyder’s corporate tax plan includes phase out of state tax credits

Snyder’s tax plan hits big firms hardest

At the same time, Snyder is expected to significantly cut back targeted tax credits such as those received by the film industry and paid to industry by the Michigan Economic Growth Authority.

Business owners, many legislators and tax opponents roundly applauded Gov. Rick Snyder’s State of the State pledge to kill the Michigan Business Tax, but another disaster looms if any time lapses before Plan B is in place.

“What you don’t want to do is eliminate the tax, then figure out how you’re going to replace it. That would be a bad strategy,” Business Leaders for Michigan President Doug Rothwell told editors of The Press on Thursday.

Please Click the Text and Photo above to read the source articles of this post.