Divided opinion on service tax

LANSING, Mich. - A public education advocacy group said Monday that Michigan should begin taxing consumer services at 5.5 percent, while reducing the existing sales tax from 6 to 5.5 percent, as a way to generate $550 million for schools in 2011, according to The Associated Press.

However, in a separate report in the Grand Haven Tribune, a cosmetologist warned that her industry already is seeing fewer customers and that a service tax would create more financial pressure.

Save our Students, Schools and State, a coalition of public education groups, said that a survey of 300 public school districts showed that 86 percent anticipate layoffs in the coming year if school funding is reduced by a projected $268 per pupil, an AP report posted at mlive.com said.

The projection is based on the anticipated deficit in the School Aid Fund and the fact that schools will have to contribute more to the school employee pension system next year, the report said. SOS supports a plan to require school employees to pay more of their own health insurance costs, AP reported.

Service taxes have been proposed in several states, according to a report by Stateline.org, published in the Tribune. Pamela Hahn, secretary of the Michigan Cosmetologists Association, said that a service tax might result in more salons closing and fewer businesses paying taxes, the report said.

"How does that help?" Hahn asked, according to Stateline.org.

The Associated Press, "Survey: 86 percent of Michigan school districts expect layoffs," March 8, 2010

Grand Haven Tribune, "States weigh sales tax on services," March 8, 2010

Mackinac Center for Public Policy, "School Funding, State Budget Explained," Jan. 18, 2010