News Story

The Lowdown

Oscar-Winning Taxes

An estimated $600 million of the $1.4 billion tax increase imposed on Michigan last fall will come from a 22 percent surcharge lawmakers added to the Michigan Business Tax, the state's primary income levy on companies doing business within the state. The end result, according the Michigan Chamber of Commerce, has been to create a Michigan Business Tax that is much more complicated, costly and destructive to economic growth than even the notorious Single Business Tax that it replaced.

From a spring survey of nearly 10 percent of its more than 7,000 members, the Michigan Chamber announced that 77 percent reported a higher tax burden. One-third of those reporting hikes said the increase was in excess of 100 percent over the SBT; eleven percent reported a hike of more than 300 percent and one member reported a tax increase of 1,000 percent.

Forty-five percent of those reporting higher taxes said they would cope by laying-off employees or by delaying/cancelling planned salary increases; 15 percent stated they would cancel planned expansion within the state or leave the state entirely. 

Senate Bill 1242 would offer a small amount of relief. The Gongwer News Service reports that its enactment would reduce the surcharge portion of the MBT by an estimated $130 million per year for three years. However, this provides only a partial remedy: It would still leave the entirety of the original MBT rate and most of the surcharge in place, meaning a net tax increase on Michigan businesses would remain.

Even this modest reform is unlikely: State government has already created new programs that spend the money being brought in by the tax hike. The Michigan Chamber has drawn particular attention to the package of subsidies for film producers that was requested by the governor and approved by lawmakers earlier this year. Carrying an estimated price tag of $118.2 million for just the first year, the moviemaker incentives are an example of state spending that makes even the meager tax cut in Senate Bill 1242 less likely. 

"This administration thinks it's OK to send refund checks to Hollywood producers who have no incentive to keep a presence here and not to hard-working job providers who are trying to improve this economy," noted Tricia Kinley, the Michigan Chamber's tax policy director.

Further driving home the point, the Chamber later produced a "movie" of its own: "How to Lower Your Michigan Business Tax Liability ... and Win an Oscar While You're At It." It features State Rep. Chuck Moss, R-Birmingham, narrating a satirical lesson regarding how all Michigan job providers can pretend to be film producers, thereby tricking politicians into giving them tax rebates. When the "folks from Lansing" ask about the non-existent script, he warns, "just tell ‘em it's in re-write."

The video is added at the end of this article.


Student Housing Bubble

Undergraduate students living in the University of Michigan's West Quad dorms on the Ann Arbor campus paid $8,190 for a double room last school year, according to a May 19 article in the Michigan Daily, the campus student newspaper. This year, that price will jump $400 because of a 4.9 percent hike in residence hall room rates. The article states that on-campus housing at the university is more expensive than nine of the Big Ten institutions, with just Northwestern University — the conference's only private school — charging more.

Meanwhile, the Ann Arbor Area Board of Realtors reported in April that the average home sale price in the region surrounding the campus was 6.58 percent lower during the 2008 January-April selling period than during the same months in 2007. This is consistent with a statewide 11.56 percent average sale price decline between the same selling periods, as measured by the Michigan Association of Realtors.

The campus housing director is quoted as defending the higher dorm costs by pointing to benefits that are not offered elsewhere:

"We're the only housing in the nation that has our own security for housing," she said. "Another thing is we have multicultural lounges — we have multicultural hall councils (and) peer advisors."

The article quotes one student acknowledging the value that comes with higher relative housing costs. Another resident expressed skepticism that additional spending is needed for student activities, alleging that a recent surplus in one dorm budget went toward questionable ends:

"In Markley, we had money left over. We spent it on random stuff, hall t-shirts and a Harry Potter week. I didn't think we needed as much money as we had left at the end."



The May/June 2008 edition of "The Lowdown" reviewed a report from Taxpayers for Common Sense ( that itemized the dollar amount of fiscal 2008 federal budget earmark requests that can be credited to each member of Congress. The findings for each member of the Michigan congressional delegation were listed at the end of this article, but Rep. Joe Knollenberg, R-Oakland County, was erroneously left off of the list.

According to the TCS report, Knollenberg was the sponsor of $33,317,990 worth of earmark requests in the fiscal 2008 federal budget.

Michigan Capitol Confidential apologizes for the oversight.


The Michigan Chamber of Commerce video noted in the first story is below:

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.