Michigan Developments
Eric Rule,
Director of Governmental Affairs

SBT elimination moved up two years
The Michigan Legislature met for one day during its summer recess to approve a measure accelerating the elimination of the Single Business Tax (SBT) by two years. The SBT had been scheduled to disappear at the end of 2009, but that date will now be the end of 2007. The vote was straight party line in the Senate, 22-16, and 64-36 in the House.

Governor Granholm vetoed the Republicans’ previous last attempt to do away with the oft-maligned tax, claiming it was irresponsible to repeal it without also replacing it with another tax or taxes. Republicans argue the effort is meant to get the administration and the legislature serious about coming up with a complete solution—one that will help spur Michigan’s economy out of its slump.

In order to avoid another gubernatorial veto, the GOP put forward the latest plan in the form of a citizens’ initiative petition drive. With this tactic, once the legislature passes the measure—as it did—it bypasses the governor and becomes law.

The Michigan Democratic Party and the administration called the passage of the measure foolish, claiming Republicans are going to recoup the lost revenue through increased taxes on citizens and jeopardize critical services such as police and fire protection due to reduced funding. Republicans repeatedly deny the charge.

The question continues to be: what will replace the SBT? No one will know until next session. House Speaker Craig DeRoche (R-Novi) has indicated his desire to study the issue throughout the remainder of the year and start dealing with how to replace it next year. The November election no doubt has something to do with this strategy.

Minimum-wage fix-it negotiations continue
Republican leaders are closer to reaching an agreement with Democratic leaders about what to trade for granting immediate effect for a bill that would return overtime exemptions to the status quo, before the minimum-wage increase was passed. Democrats originally said they wanted a reversal of a Supreme Court ruling on serious impairment of body function, which Republicans refused point blank.

Apparently the item on the table from Senate Majority Leader Ken Sikkema (R-Wyoming) is moving legislation that embodies the Merit Scholarship changes the governor wants in exchange for support for the minimum-wage fix-it bill. Senate Minority Leader Bob Emerson (D-Flint) countered with a proposal that would add tipped employees into the increased state minimum wage.

At press time, no solid agreements had been reached, but Sikkema indicated substantial progress had been made. He also indicated his desire to see action completed on the issue on August 30, when the legislature returns for one session day.

One possible problem has arisen. Reportedly, Speaker DeRoche does not favor the Merit Scholarship as an option in the negotiations because of the huge revenue implications it would have on the budget. It does seem that something will ultimately be worked out by August 30, however.

Administration pulls plug on MiPC
Retailers scored a significant victory as the Granholm administration announced it would not award any contracts to the applicants of the program known as MiPC, a government-run purchasing pool intended to help low-income families obtain computers.

In a letter to State Sen. Jason Allen (R-Traverse City) dated August 4, Department of Information and Technology Director Terry Takai indicated that it is not in the best interest of the state to award bids at this time. Allen had repeatedly held hearings on the program and, along with MRA, expressed deep concerns about the idea.

Allen and his Republican colleagues on the Senate Commerce and Labor Committee worked repeatedly with MRA to discern how MiPC would affect retail in Michigan, discovering numerous detrimental effects. As committee chair, Allen used the committee to bring to light many specifics of the program through questioning the department.

In addition, MRA’s research on the issue raised some serious questions about whether the program fell outside the scope of the department’s constitutional authority. MRA will continue to monitor the situation to make sure the program is not revived at some point in the future.

Update from Washington
James Goldberg,
MRA Washington Counsel

New travel ID requirements coming soon
The Customs and Border Protection Service has published proposed rules to implement the new requirement that all individuals entering the U.S. from Western Hemisphere countries via air and sea must have a passport. The travel ID requirement is scheduled to take effect January 8, 2007—a week later than originally planned—to accommodate holiday travel.

Currently, only a valid driver’s license is required to enter the U.S. from Canada, Mexico and certain Caribbean countries, and it’s estimated that only about one-quarter of all U.S. citizens have a passport. The new requirement is expected to spark a sharp increase in new passport applications, possibly delaying the normal 4-6 weeks processing time.

The second part of the so-called Western Hemisphere Travel Initiative requiring passports or other accepted documents to denote identity and citizenship will take effect January 1, 2008. At that time, the new travel ID requirement will be applicable to land entries as well, impacting the thousands of individuals who freely cross into the U.S. from Canada or Mexico for work or other purposes.

For land crossings, the Department of State, in consultation with the Department of Homeland Security, is developing an alternative travel document, a card-format, limited-use passport called a People Access Security Card (PASS). The PASS card is envisioned to be the size of a credit card and will be a secure document that establishes both identity and citizenship.

It’s anticipated that the PASS document, if approved as part of the land-crossing phase of the larger intiative, will cost less to obtain than traditional passports.

MRA members or their employees who need to obtain passports for the first time can fill out the application form online at www.state.gov. It takes 4-6 weeks to obtain a passport, although an additional $60 fee will expedite the service.

Consumer Price Index may be changing
When is one-tenth of 1 percent important? When it shows an increase or decrease in the Consumer Price Index (CPI), the nation’s key measure of inflation.

And because of that importance, and to better reflect actual price changes in the marketplace, the Bureau of Labor Statistics, which issues the CPI each month, may soon make a change to use three decimal places instead of one in publishing CPI data.

Each month, BLS surveys prices for about 80,000 items in some 200 categories and converts the results to an index number. These numbers are then combined into a variety of aggregates, such as the “all items” and the so-called “core” index (which excludes goods and energy, the two most volatile components). But in both phases, the BLS results are rounded—up if the increase is, for example, 0.251 percent and down if it is 0.249 percent.

Rounding, it has been pointed out, can yield a one-tenth-of-one-percent (0.1%) change even when the change is only one-one thousandth of one percent (0.001%).

No decision has been made, but if the change does take effect, it won’t be until sometime in the first or second quarter of 2007.

What’s wrong with this picture?
Republicans pushed a $2.10 increase in the federal minimum wage, while Democrats resisted.

That’s what happened on the floor of the Senate just before the August recess when the Republican leadership coupled a minimum wage hike, the first in nine years, with legislation to reform the pension system and make additional permanent changes in the federal estate tax.

The GOP wanted the estate tax provisions but not necessarily the minimum wage. But the leadership thought they could do an election-year favor for their moderate members by acquiescing in the wage hike to get the estate tax reduction. Throwing in pension reform, deemed a high priority after recent adverse changes by airlines and auto manufacturers, seemed like icing on the cake.

Democrats, who oppose making federal estate tax changes permanent, denied the Republicans the 60 votes they needed to gate past a threatened filibuster, so the so-called “trifecta” package died.

However, don’t bet against parts of it coming back either just before the election or in the lame-duck session which will follow November voting.

Return to September Michigan Retailer Page one • MRA home