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January 25, 2007 Senate Republican Replacement Tax Plan

January 25, 2007
Today, the Senate Republicans introduced a three bill package to replace the single business tax.  The press release and bills are in the Bill section below.  The proposal would replace the single business tax with three taxes.  First a gross receipts tax allowing a deduction for purchases from other businesses.  Second, a net worth tax calculated based on assets minus liabilities. Third a business income tax based on federal taxable income.  The rate would be determined by the Michigan Department of Treasury along with the Senate and House fiscal agencies at a rate to generate 1.5 billion.  However, it is not clear how much of the tax base is to be generated by any of the taxes.  This will make it difficult, if not impossible for businesses to determine how the tax will impact their bottom line.  The taxes will be apportioned by a 100% sales factor but the sales factor sourcing of services is based on cost of performance for the gross receipts and net worth tax and market for business income tax.  Further, the gross receipts tax and the net worth tax provide that any taxpayer without sales in Michigan will have to source based on property and payroll factors.  A further analysis will follow after all 170 pages of these combined bills have been digested.