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Governor Releases 2010-2011 Budget

February 13, 2010

Yesterday Gov. Granholm presented her fiscal year 2010-2011 Budget to a joint session of the House and Senate Appropriations Committees. Her proposal relies on a new sales tax on services, future reductions in the MBT, a large infusion of federal stimulus dollars and some reforms.

The sales tax proposal would lower the current sales tax rate from 6% to 5.5%, but it would expand the tax to include most consumer services. There are exclusions for health care, social assistance, education, new construction, real estate, insurance commissions, and services directly connected to business operations or business-to-business transactions.

The proposal does include business tax relief as well. The MBT surcharge would be phased out over two years beginning in 2011. The MBT’s gross receipts tax rate would be lowered from 0.8 percent to 0.6 percent over two years as well beginning in 2012.

Her plan also includes roughly $556 million in cuts and reforms to state operations, and also relies on approximately $700 million of federal money that has not yet been approved by Congress.

It is extremely disappointing that the administration did not lead more with structural reforms and cuts to meet the $1.7 billion structural gap in the General Fund/General Purpose (GF/GP) budget. Furthermore, the Governor relies on a new services tax while phasing in over time some reductions to the Michigan Business Tax (MBT). This represents a tax hike of over $500 million with a promise that the MBT will be phased out only after the Governor has concluded her service to the state.

We continue to work with our elected officials to pass meaningful reforms to the way government operates before they even consider any tax increases.

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