April 8, 2014 (Lansing) – A patchwork of local sales taxes, plopped on top of
the state sales tax, would send consumers hopscotching around for the lowest
rates and create a regulatory headache for small businesses with multiple
locations, say most members of the National
Federation of Independent Business (NFIB) in a new survey.
“Michigan has 83 counties
and over 1,500 municipal governments,” said NFIB State Director Charlie Owens.
“Our members are afraid that a local sales tax system would become a
free-for-all with no uniformity or predictability.”
During discussions on road funding in the state
legislature this session the idea of granting local governments the authority
to tax sales for road maintenance was floated. As with most tax discussions,
the conversation also suggested that broader taxing authority by the locals
should be considered. Michigan currently has no city, local, or county sales
tax. The state sales tax rate is 6 percent and can only be raised by a
state-wide vote of the people. Although local sales taxes are not expressly
prohibited by the Michigan Constitution, the Michigan Attorney General has
interpreted the Constitution as effectively prohibiting them. Some are
suggesting that Michigan should allow local governments to levy a sales tax
within their jurisdiction.
In the recent survey of
NFIB members in Michigan, 91 percent opposed giving local authorities the power
to impose their own sales taxes. Only
four percent support the idea while five percent were undecided.
“There’s no ambiguity in
the result,” said Owens. “Small business
owners are strongly opposed to a local sales tax.”
However, Owens said that
NFIB members are supportive of the upcoming August ballot proposal for local
funding via a new Use Tax sharing formula. Owens said the change would create a
more stable tax system for local governments that are concerned about revenue
while granting small businesses relief from the current local Personal Property
Tax.
“The August proposal will
move local governments to a more stable and growing tax base, the Use Tax, and
away from the declining Personal Property Tax base,” said Owens. “It will be a better and more uniform
approach to local funding than a hodgepodge of different local sales tax
rates.”
Michigan’s Use Tax is a companion tax to the six
percent sales tax and is assessed on out of state purchases, internet sales,
telecommunications and lodging. Recent reforms
to the Personal Property Tax passed in 2012 will require a statewide vote of
the people this August in order to implement a new structure for local
government revenue reimbursement. If voters reject the proposal, then the
entire Personal Property Tax Reform effort will be in jeopardy along with local
funding.
The August ballot proposal,
Owens noted, would not increase the current six percent tax rate at either the
state or local level on sales or use tax.
But it would change how the revenues are shared between the state and
local communities. According to Michigan’s Constitution, changing that formula
requires voter approval.
“Expiring tax credits from
the repealed Michigan Business Tax are coming back to the state general fund
and allowing for this change in the local tax formula that does not increase
taxes overall,” said Owens. “NFIB will
be working to ensure the success of the statewide ballot proposal for local
funding because it is a ‘win-win’ for local communities and tax payers.”
For more information about
NFIB, please visit www.nfib.com.
