MI Dems business tax deal in sight

Detroit Free Press - www.freep.com - Dems: Business tax deal in sight Dems: Business tax deal in sight House plan called key piece in solving state budget crisis April 25, 2007 BY CHRIS CHRISTOFF FREE PRESS LANSING BUREAU CHIEF LANSING -- House Democrats are to unveil Thursday their plan to replace Michigan's Single Business Tax with a new tax, a move they hope will energize negotiations to solve the state's budget crisis. House Speaker Andy Dillon, D-Redford Township, said Tuesday he hopes for a business tax agreement with Republicans and Gov. Jennifer Granholm by early May. Word of the plan came as the Legislature inched forward on another front -- sending Granholm a bill that closes $315 million of a deficit for spending on public schools but leaves about $62 million unresolved. That shortfall, which translates to about $40 per student, is expected to increase next month when the state reports spring tax collections. The business tax proposal that Democrats plan to present to the House is not the first -- Granholm, business groups and Senate Republicans have offered competing plans. But the House measure is expected to nudge negotiations to resolve a remaining $350-million state deficit for the current year that threatens cities, school districts and hospitals with cuts in state payments. The deficit at its worst was about $900 million. "We may well see an SBT breakthrough before anything else," said veteran lobbyist Dennis Cawthorne, a former Republican legislator. "The two sides aren't that far apart." The difficulty of replacing the SBT, which is set to expire Dec. 31, has been a worrisome factor in reaching a budget compromise. Cawthorne said a business tax agreement could break an apparent stalemate over whether to raise taxes elsewhere or make deeper spending cuts to balance the budget. Dillon said the Democratic plan would raise the same revenue as the SBT -- about $1.9 billion a year -- but would give tax cuts to companies based in Michigan or with significant employment and facilities there. For example, he said, Michigan-based retailer Meijer would get a tax cut while Arkansas-based competitor Wal-Mart would pay more. Dillon also said the plan would "go a long way" toward eliminating personal property taxes on business machinery and other equipment. Meanwhile, the Granholm administration is firming up plans to lay off more than 15,000 nonunion employees for up to 20 days if a budget deal isn't reached by mid-May, when the state expects to run out of cash. Last week, Granholm and the Michigan Chamber of Commerce -- usually political rivals -- teamed in a joint statement urging the Legislature to agree on a replacement for the SBT by June 30. Granholm has insisted that a new business tax plan fully replace the revenues the SBT generated. The chamber and other business groups insist that the state give a net tax cut to businesses. But both Granholm and business advocates fear that the uncertainty of business taxes is scaring away businesses from investing in Michigan. A major disagreement between Granholm and Senate Republicans is whether to first solve the current deficit before tackling the 2007-08 budget. Granholm wants to resolve both simultaneously with budget cuts and new taxes. Republicans want to solve this year's deficit with budget cuts alone, then deal with next