Traverse City Record-Eagle

Michigan

February 12, 2010

Granholm proposes expanding sales tax

LANSING (AP) -- Michigan Gov. Jennifer Granholm on Thursday unveiled a budget proposal that included extending the tax to services while eliminating a business tax surcharge over the next two years.

The proposals were included in a $47.1 billion budget plan that calls for no cuts in spending to public education, local governments or universities and community colleges. It would trim the state work force and require state workers and teachers to pay more toward their pension and health care costs when it takes effect Oct. 1.

The business tax cuts and changes in personnel costs got a warm reception from many business groups and Republicans. But the Democratic governor will face a tough task getting the sales tax extended to services, even with lowering the tax rate.

"We are very disappointed that, with Michigan leading the nation in unemployment, the governor refuses to bring the cost of state government in line with taxpayer ability to pay," said Jim Holcomb, Michigan Chamber of Commerce general counsel. "Instead she offers an agenda that includes a $554 million sales tax increase on working families during a recession."

Granholm said the state cannot continue to cut funding for public schools as it did this year. Without the extra money, she said school districts could see a $225-per-pupil cut in funding next year in addition to the $165 cut they took for each student this year.

"We still have to invest in the things that businesses want in order for them to grow," she said. "That means education. Education directly relates to job creation."

Under Granholm's proposal, the sales tax wouldn't apply to health care and social assistance, education, new construction, real estate and insurance commissions and services directly connected to business operations. It would be extended to services on Dec. 1.

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