Michigan Business Tax eliminated, shift to flat tax causing mixed emotions
Gov. Rick Snyder’s official budget proposal to eliminate the Michigan Business Tax and replace it with a flat 6-percent corporate income tax has drawn a mixed reaction.
President and CEO of Middle Michigan Development Corporation Brain Anderson said the elimination of the MBT is both negative and positive, depending on who it’s affecting.
The transition would equal a $1.8 billion tax cut, affecting around 95,000 companies that pay taxes through their personal income tax return. These small businesses will no longer have to pay business taxes.
The new plan is thought to energize the economy and create jobs, according to a report from michigan.gov.
“For Class-C businesses, shifting to a flat tax is a tax increase in a lot of situations,” Anderson said. “There’s a little bit of negative feedback.”
But on the other side, a flat tax makes it easier for credit situations, he said, and it may be a higher cost, but it’s more simplistic.
For Class-S businesses, things are more cut and dry for a flat tax. The small businesses that fall under the class will have a tax break, he said.
“It is a simple, straight-forward tax,” he said. “It’s going to help people because they will have much more time to operate, instead of trying to figure out their taxes.”
Even though it’s much more simplistic in the long-run, people always have a hard time adjusting to change, he said.
“People need to realize change could be a good thing. If anything, it may be a short-term pain of learning the new system,” he said. “We need to embrace change.”
Anderson said the new flat tax puts Michigan in the lowest tax bracket sales in America. When companies are deciding where to locate, there is a lower cost of doing business in the state.
“From what I’m hearing, people are embracing the new tax system and are actually looking forward to it,” he said.
Some businesses are unaware of the change and whether it applies specifically to them.
“There’s a lot of media around it,” he said. “They will know once they start doing taxes.”
Thomas Raymond, owner of Tom’s Professional Accounting Services, 504 N. Main St., said the shift to a 6-percent corporate flat tax will be fairer than the MBT.
“Whatever business brings in, whether self-employed or a corporation, everybody is getting taxed instead of just the big companies,” Raymond said.
Previously, the MBT only targeted businesses that made more than a $350,000 net profit per year, he said. Now, everyone gets taxed.
“If we are looking at it from a business point, everyone should be taxed,” he said. “They do it at the federal level, so they should do it at state.”