Don’t increase taxes on small businesses
June 30, 2019
By Brian Calley
Originally published in The Detroit News
Michigan has come a long way in creating a better environment for economic success. The nature of public policy is that there is always more work that needs to be done. One area where Michigan gets it right is in our business tax climate. That wasn’t always the case.
For about 40 years, Michigan had one of the worst, most complicated tax codes in the country. Attempts to improve upon that uncompetitive system were stymied by a global economic recession that hit Michigan harder than anyone else. That all changed in 2011 when Michigan made a leap to best practice.
Since that time, the amount of taxes paid by businesses has risen substantially. This increase in state tax revenue is due to a better environment for success. Businesses grew and expanded, hired more people, had more income and, therefore, paid more taxes. Michigan government has benefited greatly because of this economic success of businesses.
The most important improvement from the 2011 tax code reform was that small businesses no longer had to pay a double tax on their earnings. Most small businesses are organized as pass-through entities. That means 100% of their business income flows through to their personal tax return. It is subject to the same rate that everyone else pays. For decades, Michigan’s tax code subjected that same income to a separate business tax as well. The Snyder administration did away with that unfair and counterproductive policy. No one should have to pay taxes twice on the same income.
Michigan is up over half a million jobs since then. Income tax, property tax and sales tax collections all went up as a result of the improved economic performance of this state, which is mainly dependent on people finding good work. The last thing we should do is put our economy in jeopardy by going back to an uncompetitive tax code for our small businesses.
Small businesses create most of the jobs in Michigan — literally more than half. Yet the Michigan House Democrats recently proposed a 100% increase on Michigan small businesses to fix the roads. Both the Small Business Association of Michigan and I are willing to consider a variety of options to increase the amount of investment into our roads. I have a record to prove that. But doubling the taxes on small businesses and asking them to carry a heavier burden than anyone else does not make sense. It’s a short-term gain for state government, with an enormous long-term cost for our people and our economy.
Small businesses are the heroes of our long-term economic expansion in Michigan. We should salute them, thank them and appreciate them — not treat them like a piggy bank.
Brian Calley is the president of the Small Business Association of Michigan.