Michigan tax wrongs righted

This month, at last, the Michigan legislature began to take seriously the job of correcting some tax wrongs that needed correcting for years. The most important change: they decreased the tax on business property (only by 10% but it’s a start) and shifted the burden to a tax on business profit.

The personal property tax was paid on any equipment, inventory, or supplies that a business kept in-house. No matter if their were sales or none, a tax was due so long as a business had equipment or unsold inventory. Even in years where there were no profits or sales, money was due to the state — a tax on your dreams of somehow making a go of things. Aside from its complexity of valuing your unused supplies and inventory, the tax guaranteed that struggling businesses would fail — immediately. The governor (Granholm – glad she’s gone) claimed that taxing unused equipment and inventory protected the state coffers from the ups and downs of the business cycle, but the state was is far better shape than a struggling business when it came to the cost of borrowing. Besides, I’m not sure she was doing Michigan any favors by destroying businesses that were barely hanging on.

Governor Granholm (thank G-d she’s gone) gave out the money she collected to the right sort of people, her friends, and to targeted businesses that she liked: e.g. movie makers who made money-losing, dystopian films and left as soon as the checks cashed. The current governor, Snyder claims his aim is to eliminate the business property tax in 10 years, 10% at a time. I hope, we’ll see.

Another tax that’s now gone, at last, is the 0.8% on transactions between businesses. It wasn’t an unfair tax like the property tax, but was annoying to keep track of. What a mess. Keep up the good work, lads. Now if only they can do something about Detroit’s uncommonly high minimum wage.

Robert Buxbaum, November 20, 2012

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