News & Information
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| For Immediate Release |
Contact: Andy Deloney |
| February 9, 2007 |
517/377-3931 |
Granholm proposes several tax increases
to support spending Food and beverage industry directly
impacted
To address what she calls “structural” revenue deficits and
to provide more revenues to fund the growing number and scope of government
programs, Gov. Jennifer Granholm has proposed a series of tax and fee
increases. These increases are included in a budget proposal for fiscal
year 2008 (October 1, 2007 through September 30, 2008) made by the governor
today before the state House and Senate Appropriations Committees.
She balanced her FY 2008 budget proposal by using a formula
comprised of 40 percent one-time shifts, 10 percent in spending cuts, and 50
percent in new and increased taxes.
While the total number of taxes and fees that will either be
created or increased in her budget proposal has yet to be determined, what is
known that a number of the biggest increases directly impact Michigan’s food
and beverage service industry.
They are listed here as follows:
Replacement for the single business tax (SBT)
The first major piece of the “revenue enhancement” puzzle is
a replacement for the soon-to-be-repealed single business tax (SBT). The
SBT will be repealed on December 31, 2007.
The replacement is designed to result in a net tax cut for
businesses – in comparison to the SBT – of $450 million. This figure is
arrived at by creating a $550 million cut for Michigan-based businesses while
increasing taxes on businesses headquartered outside the state by $100 million. The tax is a three-part tax on gross receipts, business
income (profits) and assets coupled with personal property tax relief on
business property classified as “industrial” or “commercial.”
Sales tax on services
Gov. Granholm wants this tax increase to be effective on
June 1, 2007. She has proposed a 2 percent tax on services. This
includes business-to-business sales of services as well. Therefore, not
only will a customer pay a 2 percent sales tax when they visit the barber,
drycleaner or purchase a ticket to professional sporting event, a restaurant
operator will pay a 2 percent sales tax when purchasing services from a
consultant, a designer, an accountant, or an attorney.
Liquor mark-up increase
Gov. Granholm has proposed an increase in the state mark-up
on distilled spirits. The current mark-up is 65 percent. She has
proposed increasing it to 75 percent. Currently, liquor licensees purchase distilled spirits from
the Michigan Liquor Control Commission after the state has marked-up the price
65 percent and subtracted out a 17 percent discount for the licensee. For example, a bottle of spirits is sold by the distiller to
the state for $10.00. The state marks up the price 65 percent to $16.50,
subtracts a 17 percent discount – in this example $2.80 – and sells it to a
retail licensee for $13.70. Under the Granholm proposal, a bottle of spirits that
currently costs a retail licensee $13.70 would cost $14.53.
Tripling of liquor license and permit fees
Gov. Granholm has again proposed a tripling of all liquor
license and permit fees, with the intended purpose of the revenues being
support for general fund spending.
While the 300 percent increase in the fees for all liquor
licenses and permits is problematic enough, the other troubling component is
the proposed use of the funds for general fund spending, specifically revenue
sharing with local governments and local fire and police services.
Currently, revenues generated from these fees go to the Michigan Liquor Control
Commission to fund the operations and services the MLCC provides to licensees.
What has been proposed is establishing a new precedent: using these revenues
for purposes not related to liquor control or licensee service without
enhancing or improving the operations or service quality the MLCC provides
today. This proposal has been soundly defeated in previous
legislative sessions with MRA leading the way.
Death tax
Gov. Granholm has once again proposed a so-called
“decoupling” of Michigan from the federal phase-out of the estate tax, often referred to in business as
the death tax. Decoupling essentially means that Michigan would still continue to assess the
tax and receive revenues from it as the federal tax continues to phase-out by
2010.
MRA will say on top of this issue as the governor sends
bills to the state Legislature.
If you have questions or concerns, please
contact the MRA Public Affairs Department today at (800) 968-9668.
Founded in 1921, the Michigan Restaurant Association represents more than 4,500 Michigan foodservice establishments. The foodservice industry plays an integral role in Michigan’s economy, employing more than 436,000 people and creating more than $11.3 billion in total annual sales. For more information, call (517) 482-5244.
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