The 2019 Political Landscape for Michigan Small Business

Date: November 14, 2018

2019 Potential Challenges on the horizon.

The end of eight years of total Republican control and a return to a divided state government as a result of the 2018 election outcomes (see related story) will create new challenges for small business in Michigan. There is no denying that the prior eight years saw a small business friendly approach to governance that resulted in major tax, fiscal, regulatory, labor, and legal victories for small business. The subsequent revival of the state’s economy and business environment cannot be denied. The challenge will be to maintain the ground gained during the last eight years and look for opportunities to work with both parties to continue Michigan’s progress forward as a great state to bring a business, grow a business, or start a business.

Potential Challenges on the horizon:

Rules and regulation: One area that is always of concern is the tendency for a governor to attempt to use the power of administrative agencies to push policies that they cannot get through the legislative process. This often occurs when the legislature and governor’s office is controlled by opposite parties. With a change in the administration under Governor Whitmer, NFIB will be on the lookout for state agencies attempting to push administration policies via regulations because they cannot achieve them through the legislative process as required.

Tax Policy: In an interview with Crain’s Detroit Business, newly elected Governor Gretchen Whitmer said she would consider making changes to the NFIB backed 2011 tax reforms that got rid of the Michigan Business Tax and made thousands of S-Corps and limited liability corporations exempt from the new 6 percent Corporate Income Tax. Whitmer said those businesses should pay more and she wants to use the money for “talent development”. As a Senator, Whitmer also voted to expand the sales tax to services to raise more revenue for the state. Finally, the danger of returning to the policies of targeted tax incentives for a chosen few industries or companies at the expense of all tax-paying businesses is a real concern. Both parties have fallen for the siren song of these “corporate welfare” schemes which were a favorite policy of the failed Granholm administration.

Labor Policy: Newly elected Governor Whitmer made it clear in her campaign that she would be pushing a “jobs plan” that includes raising the minimum wage to $15 per hour over three years and repealing Michigan’s Right-To-Work law that made union membership optional. It is also likely that she would support reinstating the Prevailing Wage Law that was repealed this year.

Legal Climate: Reforms to tort law enacted in the early nineties and recent passage of asbestos liability reforms, as well as a conservative state Supreme Court, have given our state a fair and predicable legal system.  However, with the changes to the Supreme Court from the 2018 election and an Attorney General and Governor that have the support of the trial attorney bar, we must continue to guard against legislation that would erode this important business climate advantage.

Unemployment Insurance Payroll Taxes and Claims: The Unemployment Insurance Trust Fund is derived from state unemployment payroll taxes paid by employers. Workers do not pay anything into the Unemployment Trust Fund. After years of being insolvent and borrowing to pay worker benefits, the UI Trust Fund is back in the black and loan balances outstanding are due to be paid off in 2020. While this is good news for employers, a positive balance in the Trust Fund is a temptation to many lawmakers and labor advocates to increase worker benefits and hike taxes on employers. In addition, the Unemployment Insurance the penalty and interest fund is often seen as a slush fund to balance the state budget or pursue other projects and programs unrelated to its purpose. All these threats to the Fund translate to higher payroll taxes on employers.

Related Content: News | Elections | Michigan

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