Michigan Developments
Eric Rule,
Director of Governmental Affairs

Business groups resist tax proposals
Governor Jennifer Granholm’s proposals to increase revenue through the closing of so-called “tax loopholes” have met stiff opposition from various business groups, including MRA. Rather than meeting the true definition of a loophole, most of the proposals actually increase taxes or are new taxes.

Business groups have made it clear to legislators that these proposals should not be adopted, and that state spending should be cut rather than taxes increased on businesses in Michigan. The House Tax Policy Committee agreed with this message when it failed even to take votes on most of the governor’s tax proposals.

The committee also approved a package of bills the governor put forth seeking to tax casino winnings of out-of-state residents, and to streamline how the Treasury attempts to collect income taxes owed by “flow-through entities.”

Conference highlights revenue issues
The Joint Revenue Estimating Conference concluded that FY 2004’s General Fund estimates look good, but the remaining FY 2003 budget has immediate problems due to a shortfall in the state’s School Aid Fund (SAF).

The SAF came in $91.9 million below the January estimates. This money needs to be made up before October 1, 2003, and legislators have already begun to float schemes to fill this hole.

On the positive side, FY 2003 estimates of the General Fund have not changed. Moreover, the FY 2004 General Fund revenues are estimated to be $32.9 million below previous estimates, a smaller shortfall than some had predicted.

Other predictions:
• While the unemployment rate for Michigan will be 6.5 percent for calendar year 2003, it will drop to 6.1 percent in 2004.
• Personal income will grow by 3.1 percent in calendar year 2003, but increase to 5.1 percent growth in 2004.
• Michigan wage and salary employment is down 0.7 percent from the previous year, but will increase 1.4 percent for calendar year 2004.

Congressional race getting crowded
The announcement from Congressman Nick Smith (R-Jackson) that he will not run again has wannabes scrambling. The latest to confirm he is running is former Rep. Paul DeWeese (R-Williamston). DeWeese lost a Senate race last fall to Sen. Virg Bernero (D-Lansing).

The 7th Congressional District, which is comprised of Branch, Eaton, Hillsdale, Jackson, Lenawee and portions of Washtenaw and Calhoun counties, has also drawn the interest of several prominent Republicans. They include Rep. Clark Bisbee (R-Jackson), Rep. Gene DeRossett (R-Manchester) and Ann Norlander, former Calhoun County clerk, former Sen. Joe Schwarz (R-Battle Creek) and Sen. Cameron Brown (R-Sturgis).

Anti-spam bill clears house
A bill to regulate unsolicited commercial e-mail (“spam”), sponsored by Rep. Bill Huizenga (R-Zeeland), cleared the House unanimously. The bill would require such e-mail to include various disclosures.

The bill has been sent to a workgroup in the Senate, as Sen. Mike Bishop (R-Rochester) thought the bill needed work before moving forward. Sen. Bishop is the sponsor of a similar Senate bill that would create a state-administered “do-not-spam” list.

Bishop has problems with the lack of enforcement included in the House bill and wants it to have some teeth. Sen. Bruce Patterson (R-Canton), chair of the Senate Technology and Energy Committee, has asked the group to report back to him with their results.

Liquor Levy May Be Increased
Rep. Gretchen Whitmer (D-East Lansing) will soon introduce legislation granting the Michigan Liquor Control Commission the power to increase the rate it charges for distributing liquor. The additional revenue raised through the increased charge would be earmarked for fire protection services in communities where there are state buildings.

Gov. Granholm and Speaker Rick Johnson (R-LeRoy) are also reportedly open to such a proposal.

While Whitmer sees no problem with increasing the fees to distributors of liquor, she may be open to minimizing the impact of the increase on retailers of the products covered. MRA will facilitate conversations with the representative on this issue.

Update from Washington
James Goldberg,
MRA Washington Counsel

Visa, Mastercard to lower debit card fees
Visa USA and MasterCard International, Inc. have agreed to significantly lower the fees they charge retailers to process debit cards, beginning August 1, as part of settlement in a massive antitrust case brought by Sears, Wal-Mart and other major retailers against the two credit card giants.

Reaching agreement just before trial was about to begin, Visa and MasterCard also agreed to no longer require retailers who honor their credit cards to honor their debit cards. That portion of the agreement takes effect January 1, 2004.

Finally, Visa will pay $2 billion and MasterCard will pay $1 billion into a retailers’ settlement fund that will be distributed among the class-action plaintiffs. Though the large retailers who brought the suit are expected to receive much of the fund, any retailer accepting the two companies’ debit cards can also expect to share in the distribution.

Visa and MasterCard have charged retailers about 1.5 percent of each sale to process a credit or debit card transaction, while private debit card networks—like Star, Most and Pulse—charge only 15 to 25 cents per transaction.

The credit card giants also agreed to conspicuously label their debit cards as either a “check card” or a “debit” card when they are reissued to existing customers.

A spokesman for the plaintiffs indicated that the major impact of the settlement will be to reduce retailers’ costs for handling debit cards, which are becoming increasingly popular with consumers.

Copies of the court settlement papers can be viewed at www.cpny.com.

Bioterrorism proposals will impact some retailers
The Food & Drug Administration is studying comments on a proposed rule requiring food manufacturers, importers, wholesalers and distributors to register. The requirement is mandated under the Public Health Response and Bioterrorism Act of 2002, passed by Congress in the wake of the 9/11 disaster.

ough the regulations exempt retailers and restaurants from the registration requirement, some may still need to register if they sell products to others for resale. For example, if a retail bakery sells some products to restaurants, it must register with the FDA.

There is no cost to register—it’s a one-time requirement—but registered facilities will also have to keep records of the source and recipients of products they distribute to others for resale.

The final registration rules will be published by mid-October, and all registrations must be completed by December 12, 2003.

Tax-cut bill raises small business expensing
After weeks of disagreement and heated debate, House and Senate tax writers have reached agreement on a $350 billion federal tax cut. At press time, the bill had passed in the House and was expected to pass in the Senate.

In addition to accelerating income tax rate cuts across the board, boosting the per-child credit and cutting the top rate on dividends and capital gains, the measure would raise the limit for small business expensing from the current $25,000 to $100,000. In order to keep the tax package low, both chambers agreed that the expensing increase will expire at the end of 2005, though few in Congress expect that will actually happen.

Congress may finally can spam
With the volume of and complaints about unsolicited e-mails—aka “spam”—increasing, Congress may finally be ready to do something about the problem, which the Federal Trade Commission now says accounts for more than 50 percent of all of the complaints it has received in the last year.

Legislation has been introduced to treat spam like unsolicited telemarketing, i.e., require the establishment of a national “do-not-spam” list that e-mailers would have to honor. Other bills would require valid, accurate return addresses to appear on unsolicited e-mails and provide recipients with the ability to request deletion of their names from the spammer’s database.

MRA’s Washington office is working with a National Retail Federation task force to review all bills and be sure that they do not interrupt legitimate business relationships to permit retailers to e-mail their existing customers with important information.