State budget solution targets businesscontinued from page 1 The budget compromise approved by state lawmakers
before breaking for summer comes largely at the expense of business. The Michigan Legislature raised the state
cigarette tax by 50 cents a pack - to $1.25 - a move expected to hurt
retailers by reducing sales or pushing them to neighboring states. The
taxes on other tobacco products, such as cigars and chewing tobacco, were
increased as well. The budget plan worked out with Governor
John Engler to avoid a projected deficit of $700 million or more over
the next two years also hits businesses by delaying a scheduled reduction
in the Single Business Tax (SBT). Although both the House and Senate passed
legislation that would essentially preserve the SBT cut, the total compromise
called for Gov. Engler to veto that bill and allow the rate freeze. Democrats
had refused to put up the votes for the cigarette tax hike unless the
SBT cut was postponed. But there were several bright spots for retailers
in the budget work, according to MRA’s Eric Rule, director of governmental
affairs. “We were able to secure important funding
for retail pharmacies,” said Rule. “The pharmacy dispensing
fee will remain at $3.77 despite serious attempts to reduce it.” The dispensing fee is contained in the Department
of Community Health budget for 2002-03 that was approved by both chambers
following conference committee action. The department budget went to Gov.
Engler, who was expected to sign it into law. A second plus was a move by the Senate to
increase the threshold for paying the SBT, from the current $250,000 to
$350,000. In addition, the Senate accelerated the phaseout of the SBT
by eliminating the tax entirely by 2009 instead of the scheduled 2022
end. The House is expected to take up the higher
threshold and accelerated phaseout when it returns on August 13. A third business-friendly item was approval
of Sunday Lottery drawings. Although Lottery retailers have been allowed
to sell tickets on Sundays, drawings for daily games have been prohibited.
Lottery officials say their revenues fall off 89 percent on Sundays because
there are no drawings. Increased Lottery sales benefit retailers
and the state School Aid Fund. The Legislature originally planned to finish budget work and adjourn by late May. That exit strategy fell apart as lawmakers repeatedly failed to reach agreement on how to plug this year’s budget holes and head off a larger deficit next year. |