Raising Taxes On Michigan Businesses Won’t Bring On The Armageddon

So says Michigan Advance’s business writer, and friend of the LOL podcast, Rick Haglund.

Governor Gretchen Whitmer is proposing a 6% income tax increase on small businesses. Business groups and Republicans are warning of economic peril if Whitmer gets her way.

But Haglund refutes critics of the tax increase proposal by saying:

Nonsense. None of these business groups and lawmakers offered any evidence in their denunciations that raising state business taxes hurts job growth and the economy.

That’s because they can’t. State corporate income taxes aren’t a big enough share of overall business costs to have much of an impact on jobs.

“It’s de minimis” — too small to make a difference, said Mitch Bean, the former director of the nonpartisan House Fiscal Agency.

Haglund notes that Michigan had higher annual job growth during the 2000’s when businesses paid more taxes than during the Snyder years when he and the Republicans cut those taxes.

And small businesses would get a little relief, as Haglund writes:

But the impact of the new business tax would be largely offset by allowing pass-through business owners to take a 4.25 percent credit for business income on their personal returns, avoiding double taxation of business income.

That would result in an effective business tax rate of 1.75 percent. About 250,000 mostly small businesses would be subject to the tax. A tax credit on the first $50,000 in income would shield many of the smallest businesses from tax liability.

Now, if you recall, to help pay for the business tax cuts, Snyder and the GOP raised taxes on retirement income. As we saw from her first budget proposal, Whitmer is following through with her campaign promise to erase that retiree tax.

It’s something I was always against, and if fact, I’ve praised Whitmer for trying to reverse the retirement tax increase. Snyder and his Republicans showed they were willing to do whatever it took to redistribute money back to the top at the expense of average Michiganders.

But Haglund says some economists believe Whitmer’s wrong in her efforts to get rid of it, especially when we need all the funding we can get to revamp our infrastructure.

A couple of state economists who talked with Haglund also noted that abolishing the tax will truly only benefit “affluent” retirees.

I’ll have more to say about the retirement tax in my next Left of Lansing podcast. But I have to honestly say, I this column gave me something to mull-over regarding the retirement tax.

And now, maybe, I’m reconsidering my original position.

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  1. There are no words to show my appreciation!

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