The Michigan SBT is the only Value-Added state business tax system in the United States. The federal income tax, the federal corporate income tax, the Michigan income tax, the business taxes in most states, and the local income tax all use some type of "income" or profits as their base. Most economists and the general public are familiar with the concept of income as an appropriate tax base, and as an appropriate measure "ability to pay."

By contrast, the SBT uses a value-added concept as its base. A Value-Added Tax (VAT has advantages and drawbacks, some of which are discussed in this report. VAT's are common in Europe (especially in Common Market countries) and Asia, but almost unknown in the U.S. and Canada. This unique VAT concept of the SBT has helped itbecome one of the least understood and most maligned of tax systems in Michigan, and allowed considerable confusion over the relative tax burdens of businesses of different sizes and industries.

The January 1985 document Analysis of the Michigan Single Business Tax, published by the Michigan Department of the Treasury, had as its purpose "to investigate how Single Business Tax liabilities vary between businesses in different product groups, or different sizes, and in different economic situations." [1] While this study illuminated many poorly-understood facts about the SBT, it did not quell the controversy about relative SBT burdens among industries in Michigan. Further analysis of the SBT and its effect on Michigan businesses was needed.