Small Businesses Criticize Gov’s Overemphasis on Tax Hikes, Lack of Spending Reforms

The Small Business Association of Michigan (SBAM) is very disappointed with Gov. Granholm’s proposed 2010-2011 state budget. “Heavy on tax hikes, light on spending reforms and headed in the wrong direction in terms of the long term efforts that are going to be needed to revive the economy and grow jobs,” says SBAM President and CEO Rob Fowler.


Fowler cited the gloomy results of an SBAM survey of 400 small business owners, conducted in mid-January, that found:


•    52% of small businesses said their sales decreased in the past six months
•    47% had their profits drop
•    24% were forced to cut employees
•    67% could not afford to provide wage hikes
•    61% give a negative rating to the quality of Michigan as a market for their goods and services


“With the small business economy in such sorry condition, why on earth does this administration think it’s a good idea to propose a net tax increase that takes money out of the pockets of Michigan citizens?” asks Fowler. “Instead of tax hikes, small business owners demand a right-sizing of state government, accomplished with significant, cost-saving structural reforms. Just as they have had to do with their own companies, these entrepreneurs expect state government to adjust to economic realities.”


(Do you agree or disagree with SBAM's views? Leave a comment below.)


Get Tickets Now for 2010 Michigan Celebrates Small Business

Michigan’s outstanding, award-winning small businesses will be honored April 29 at the Lansing Center as the state’s major business organizations and agencies collaborate for the sixth annual “Michigan Celebrates Small Business” event. Tickets are available at


“We are expecting over 1,000 in attendance at this year’s celebration,” says Jennifer Deamud, managing partner of Michigan Celebrates Small Business. “Michigan Celebrates is centered around entrepreneurs that are building Michigan’s economy. People want to acknowledge their success and this program does just that.”


Tickets are $135 per person or receive a 20% discount and reserve a table of eight for $850. The evening includes a cocktail reception, an address by the governor and the awards dinner at the Lansing Center in Lansing. Black tie is optional. Reasonable arrangements for persons with disabilities will be made if requested at least two weeks in advance. Contact: Jennifer Deamud, MI-SBTDC, (616) 331-7480, To register by phone, call Pam Lantrip at 800.362.5461.


Michigan Celebrates Small Business is a premier annual program to recognize entrepreneurs and small business supporters in a variety of categories. The program is a cooperative effort of the U.S. Small Business Administration – Michigan, the Small Business Association of Michigan, the Michigan Economic Development Corporation, the Michigan Small Business & Technology Development Center and the Edward Lowe Foundation.


Underwriters for this year’s Michigan Celebrates Small Business event are National City (now a part of PNC), Clark Hill PLC, the Michigan Economic Development Corporation, the Michigan Certified Development Corporation, Accident Fund Insurance Company of America and Dynamic Edge Inc.


“We’re honored to have been the primary sponsor of this prestigious event since its inception 6 years ago ,” says David Morrison, Southeast Michigan Business Banking Market Manger with PNC. “Michigan Celebrates Small Business is very important to PNC because it recognizes those companies and individuals that have taken the risks necessary to grow our economy. At PNC we have a group of seasoned bankers that help those risk takers succeed.”


Don Lee, Chief Marketing Officer of Clark Hill PLC, says “Clark Hill is focused on second-stage companies wanting to stay and grow in the state of Michigan. We have established a team of experienced professionals that are committed to serving these companies. For 5 years, we have supported and watched the Michigan Celebrates Small Business event spotlight over 300 small businesses. Now going into the 6th year, we’re ecstatic about continuing our sponsorship and commitment of the event.”


Media partners for Michigan Celebrates Small Business are MiBiz, Crain’s Detroit Business, Upper Peninsula Business Today, the Traverse City Business News, Michigan Radio,, WWJ Newsradio 950 and the Greater Lansing Business Monthly.


Election 2010

A statewide poll has been released that shows who the early front-runners would be for the gubernatorial primaries in August.

On the Republican side, Attorney General Mike Cox holds the early lead garnering 32 percent.  Congressman Pete Hoekstra had 25 percent, while Oakland County Sheriff Mike Bouchard was third with 16 percent.  Ann Arbor business executive Rick Snyder had 3 percent and State Senator Tom George is picking up just 2 percent.  400 likely Republican primary voters were surveyed.

On the Democrat side, where most of the candidates have not yet made decisions as to whether they will be on the ballot, potential candidate Denise Ilitch holds the early lead with 23 percent; she is followed by Congressman Gary Peters (who has said he is not running) with 9 percent.  House Speaker Andy Dillon picked up 8 percent.  In a three-way tie were Congressman Bart Stupak (who has also ruled out running), Lansing mayor Virg Bernero and former Genesee County Treasurer Dan Kildee, all with 6 percent.  State Representative Alma Wheeler Smith and former State Treasurer Bob Bowman had 2 percent each.  400 likely Democrat primary voters were surveyed.

The poll also measured some potential general election match-ups.

According to the poll, Cox would beat Ilitch 48 to 30 percent.  He’d beat Dillon 47 to 30 percent, and he would beat Bernero 50 to 28 percent.

If Hoekstra were the nominee, the poll had him beating Ilitch 42 to 35 percent.  He’d beat Dillon 40 to 32 percent, and he would beat Bernero by 45 to 27 percent.

President Obama’s “Small Business Jobs and Wages Tax Cut”

During his State of the Union address last week, the president outlined a proposal called the “Small Business Jobs and Wages Tax Cut.”  Below is a synopsis of the how the various proposals will work.

SBAM’s national affiliate the National Small Business Association (NSBA) prepared the following summary of the program:

The goal of Obama’s plan is to encourage job creation by giving businesses a $5,000 per worker tax credit for new hires and refunds of payroll taxes paid if firms increase their workers’ wages. Obama’s $33 billion proposal is similar to a proposal made during his 2008 presidential campaign. The “Small Business Jobs and Wage Tax Cuts” is designed to provide a cost-effective, immediate jump-start to job creation and wage growth. The key provisions are:

1.  A $5,000 tax credit for each net new job created in 2010. Employers would receive a tax credit of up to $5,000 against their payroll taxes for every net new employee they hire in 2010. The credit is designed to help jumpstart job growth by giving employers an incentive to add jobs or accelerate the hiring they would have done later in the future. Start-ups would be eligible for half the credit, which provides an incentive for entrepreneurship while avoiding gaming. The credit would be administered off an employer’s unemployment insurance wage base (equal to 72 percent of the unemployment insurance wage base increase, or $5,000 credit for each additional worker who earns at least $7,000).


2.  An additional tax credit to reimburse payroll taxes on increases in inflation-adjusted payrolls. Businesses will receive a bonus 6.2 percent tax credit on aggregate wages in excess of inflation – reimbursing the employer for the Social Security payroll taxes they pay on those payroll increases. This provides firms with an incentive to increase wages or work hours for existing employees as well as hire new employees at a higher wage. This wage bonus would be calculated off the Social Security payroll tax base, so firms would not get credit for increasing wages for employees making more than the current taxable maximum of $106,800. 


3.  A cap at $500,000 per business to incentivize small business hiring. All firms with net employment increases will be eligible for these credits. But to ensure that small businesses receive the bulk of the incentive to hire, the maximum credit will be limited to $500,000 (100 employees) per business. 


4. Anti-abuse provisions to ensure that employers do not game the system. Businesses that reduce employment or payrolls in 2010 would be ineligible for both the $5,000 credit and the wage bonus. The credit would also include anti-abuse provisions designed to deny or limit the credit to employers that seek to game the system by, for example, replacing full-time employees with part-time employees. This will include limiting the maximum jobs credit amount to 25 percent of the increase in a firm’s Social Security payroll wage base. In addition, rules would prevent businesses from renaming themselves or merging in order to claim the credit. 
  1. Quarterly payment option to accelerate payments to firms. Employers would have the option of receiving the tax credit on a quarterly estimated basis. This helps get money in the hands of employers earlier in the year, could help increase awareness of the credit and provides an early incentive to hire. Non-profits will be eligible for the credit and start-ups will be eligible for half the credit. State and local governments would not be eligible.

The White House also said their proposal would make the incentives retroactive to Jan. 1, 2010.

Small Business Proposals Part of State of the State

The Governor’s State of the State address on Wednesday proposed very little in the way of new initiatives.  However, she did devote a portion of her speech to programs that would assist entrepreneurs.

The governor indicated that “one of the most effective ways to diversify our economy is to spur small business development.”

In that vein, she announced three proposals.

The first proposal fits in with SBAM’s long standing support of entrepreneurial education.  The MEDC will make a nationally recognized entrepreneurial training program available to 1,000 prospective entrepreneurs.  Participants would go though a 10-week, intensive training program where they learn markets, finances, collections and how to come out with a business plan.
The second proposal is a partnership with Michigan’s credit unions that would provide over $40 million in funding for start-ups.  The governor predicts that up to 2,100 new businesses will benefit from this effort.

Her last proposal would create a new tax credit for those who make venture capital available for businesses that need it to expand and create new jobs.

All of these proposals have been part of SBAM’s entrepreneurial agenda over the years.  We will report to you as more details become available.

Governor Proposes Government Reforms

Last Friday Gov. Granholm joined the chorus of elected officials and business groups calling for reforms to state government spending.  It is estimated that her proposed reforms would result in savings of $450 million.

Below is a list of some of the reforms that the Governor has proposed:
-  reduce costs by providing incentives to encourage 7,000 eligible state employees and 39,000 eligible public school employees to retire;
- increase state employee participation in a new health-care plan that maintains critical benefits for new state workers and their families while reducing the cost to state government by 21 percent;
-  eliminate lifetime health care for legislators;
-  continue reforming Michigan prison policies to reduce costs;
-  shift to a two-year state budget cycle;
-  audit state contracts annually and review all tax expenditures biennially to identify needed changes and savings;
-  implement pay-as-you-go budgeting;
-  give local government, school, university, and other public employees the option to participate in the state of Michigan's new, cost-effective health-care plan;
-  require competitive bidding of contracts and additional shared services among local governments and schools.

Already this week the House moved a bill to eliminate the lifetime healthcare benefits for legislators.

One problem with the governor’s proposals is that the state is facing a $1.7 billion budget deficit.  So her proposals only go part of the way to solving that problem.

The Senate Republicans released their reform proposals a couple of weeks ago, and the House Democrats are expected to make a reform announcement next week.

We will continue our efforts to work with elected officials who are looking to change the way the state operates, and keep you posted on any developments.