Service Tax Is Bad Policy

Michigan Will Lose 30,000 Jobs If Passed

There has been little discussion about the proposed Michigan service tax, but there is reason to believe that Lansing may try to push one yet this year. Legislators passed a 6 percent tax on a number of services without much public input in 2007 when the state's budget deadline lapsed. Public pressure afterward caused them to repeal the tax and replace it with the Michigan Business Tax surcharge.

The upcoming fiscal year's overspending crisis has yet to be resolved. Gov. Jennifer Granholm even has a ticking clock on her website counting down to her self-imposed July 1 budget deadline.

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Legislators should pass the fiscal 2011 budget without raising taxes. Passing a service tax will cost Michigan in economic competitiveness. Extending the sales tax to services, even when rates are decreased and the business tax lowered, will result in a loss of 30,000 jobs in this state, according to the Mike LaFaive's recent analysis of the Governor's proposal.

The tax is unpopular for another reason: reaching into taxpayers' pockets to balance the state budget is unneeded. There are plenty of areas where legislators can save money in the state budget.

The service tax is bad policy for Michigan. Legislators should resist the temptation to pass this tax hike as the budget deadline approaches.