Michigan Developments
Eric Rule,
Director of Governmental Affairs

SBT tax rewrite bills move to House floor

The House GOP’s plan to rewrite the Single Business Tax (SBT) is expected to move through the House to the Senate soon. House Bills 4922, 4972 and 4973 would provide more than $315 million in annual business tax cuts.

The bills represent shorter-term tax cuts to provide businesses with immediate relief. A more comprehensive and long-term approach will be part of a separate debate soon.

In a nutshell, the bills would:

• Provide a personal property tax credit of 25 percent for manufacturers, 10 percent for commercial businesses;

• Change the apportionment of what is taxed under the SBT to 100 percent sales;

• Reduce the tax burden on payroll and equipment;

• Phase out the remaining 50 percent of the tax on healthcare benefits in four years, beginning in 2008;

• Cut in half (from 2 to 1 percent) the SBT rate paid by about 33,000 small businesses.

In addition, the GOP says a new 21st Century Jobs Fund will provide research grants for life-science companies, seed-funding for venture capital firms and loan guarantees for emerging high-tech industries. The $1 billion price tag will be paid for by securitizing a portion of the state’s tobacco settlement—in contrast to Governor Jennifer Granholm’s proposed $2 billion bond proposal.

Granholm opposes item-pricing modernization act

Gov. Granholm has publicly stated her opposition to MRA’s House Bill 4636, which would modernize the way retailers price-mark merchandise. Granholm opposed efforts to modernize the law when she was attorney general, and even though retail has worked exhaustively behind the scenes to win her support or neutrality on the reforms, she apparently has chosen to back the status quo.

Granholm also alleged that Attorney General Mike Cox is not enforcing the current item pricing law adequately. Cox countered that the law is outdated and not of great importance to the seniors with whom he has talked. He also criticized the governor for badmouthing the bill to reporters but not industry lobbyists: “she didn’t tell that to the Costco and Home Depot lobbyists, did she?” Cox has chosen to focus his office’s attention on serious crime rather than play to the cameras by alleging that retailers are looking to scam consumers.

HB 4636 is currently in limbo after winning approval in the House Commerce Committee on June 21. It is poised for passage in the House, but some union opposition is currently delaying action. Efforts are being made to ease labor’s concerns over the bill, but the legislation is tentatively scheduled for passage in the House in September either way.

Minimum-wage demonstrators eye ballot initiative

During a daylong rally at the Capitol by organized labor in late June, Michigan AFL-CIO president Mark Gaffney implied that his organization may attempt to put the proposed minimum wage increase on the November ’06 ballot. His comments suggested that if the legislature won’t increase the minimum wage, the issue is headed to the ballot.

Gaffney indicated that labor is not in the actual petition stage, merely the strategy-planning stage. Labor and Democrats have been attempting to get legislative action to raise the minimum wage from $5.15 to $7.15. Republicans have opposed the effort.

Update from Washington
James Goldberg,
MRA Washington Counsel

Michigan joins streamlined sales tax system

Michigan is one of 11 states accepted as full members of the Streamlined Sales and Use Tax Agreement’s (SSUTA) governing board, a milestone in years of effort to develop a simplified multi-state sales tax collection system.

The participating states and six others that were accepted as associate members hope that the new system, which becomes operational October 1, will be the precursor to federal legislation that would require all remote sellers to collect state sales taxes. MRA has long championed this effort to “level the playing field.”

Although some Internet sellers are voluntarily collecting state sales taxes, the participating states hope that implementation of the new agreement will encourage more retailers to register and begin collecting those taxes this fall.

Indiana, Iowa, Kansas, Kentucky, Minnesota, Nebraska, North Carolina, Oklahoma, South Dakota and West Virginia also gained full membership. The associate member states include Arkansas, North Dakota, Ohio, Tennessee, Utah and Wyoming.

The concept underlying the agreement is that if states simplify their sales tax systems—by creating uniform definitions of what constitutes “food” or “clothing,” for example—multi-state retailers would have an easier time complying with the sales tax collection laws of multiple states. Individual states would still be free to decide whether to tax food, and, if so, at what rate, but at least all participating states would agree on what constitutes “food.”

MRA is an active participant in the Tax Fairness Coalition, which is lobbying Congress to enact legislation requiring retailers with more than $5 million in annual sales to collect sales taxes from all the states in which they do business without store locations. A Supreme Court decision more than 10 years ago makes federal legislation a requirement for state tax collection.

Now that the SSUTA implementation has become a reality, it is expected that legislation will be introduced in both houses of the U.S. Congress in the not-too-distant future.

Sears dealers challenge Kmart’s tool sales

The Dealer Store Owners Association, which represents about 250 of the more than 800 dealer-owned Sears stores in small towns across the country, has filed a lawsuit in Minneapolis accusing the nation’s third-largest retail chain of unfair competition.

The dealers are asking a federal judge to stop Sears from selling Craftsman hand tools and other Sears brands in competing Kmart stores.

Dealer stores are typically about one-fourth the size of a regular Sears department store and they typically sell a much smaller selection of merchandise, primarily hardware, appliances, electronics and home and garden equipment. Under contracts with Sears, the dealers are given exclusive areas in which to sell certain brands. The dealer stores reportedly contributed 4.4 percent of Sears’ $36.1 billion in sales last year.

In response to the suit, a Sears spokesperson said that the exclusivity agreement says only that Sears cannot sell Kenmore appliances within the same ZIP code as a dealer store.

Terrorism insurance program draws fire

The Bush administration says it is opposed to extending the govern-ment’s terrorism insurance program in its current form, but indicated it could accept a more restricted, clearly temporary measure that would encourage development of private coverage.

The Terrorism Risk Insurance Act of 2002 (TRIA) was enacted in the wake of the 9/11 disasters and provides a federal backup for commercial insurance such as business property damage and workers’ compensation.

In the event of a foreign terrorist attack, TRIA allows insurance to pay a deductible related to premium income, after which the federal government would pay 90 percent of damage claims, up to $100 billion. Many insurers dropped terrorism coverage from their property and casualty lines after 9/11, but reinstated it after enactment of TRIA, scheduled to expire Dec. 31, 2005.

Treasury Secretary John W. Snow has said that the White House would accept an extension of the program only if the event size that triggers coverage is significantly increased; if dollar deductibles and percentage co-payments from insurance carriers are increased; and if certain lines of coverage, such as commercial auto and general liability, are eliminated from the program.

Congress is expected to continue the program later this year, and may well adopt many of the admini-stration’s recommendations.

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