Lansing, MI (February 15, 2017): The state’s leading small business organization, the National Federation of Independent Business (NFIB) told the House Tax Policy Committee today that its small business members support cutting the state income tax rate to 3.9 percent.
The announcement was part of testimony given by the organization during a committee hearing on House Bill 4001, sponsored by Representative Lee Chatfield, that would lower the state’s Income Tax rate of 4.25 percent to 3.9 percent in 2018 and then phase the tax out completely over 40 years.
“Michigan small business owners support reducing the Income Tax rate to 3.9 percent, however, they are not supportive of phasing out the tax entirely,” said Charlie Owens, Michigan State Director for the NFIB. “I suspect they are skeptical that a complete elimination of the tax would not come with other tax alternatives that they find more troublesome.” Owens referenced a survey of the NFIB membership that showed support for the rate cut but not elimination of the tax over forty years as proposed in the House bill or over five years as proposed by Senate legislation that has also been introduced.
In the survey, Owens said that small business owners are showing concern over the possibility of an expansion of the sales tax to services or other business taxes in order to make up revenue lost by a complete elimination of the Income Tax.
“In the past, efforts to eliminate the income tax have been tied to increases in other taxes to make up for the decrease in revenue to the state,” said Owens. “While there have been no such proposals tied to the current efforts, our members are aware of the reality of balancing the state budget.”
Owens referred to suggestions of expanding the sales tax to services was brought up during the recent Consensus Revenue Estimating Conference as evidence that those fears are not unfounded. “This is the kind of tax policy that could undo the hard work it has taken to make Michigan a success story and it should be avoided,” said Owens.