Commentary: Blowing Up a ‘Damnable Tax’

Published June 1, 2006

During his 2006 State of the County address, Oakland County (Michigan) Executive L. Brooks Patterson called for a petition drive and ballot initiative to eliminate the state’s economically destructive Single Business Tax. Patterson called the SBT a “damnable tax” and correctly cited it as an important factor in holding down Michigan’s ailing economy.

Michigan has been in a “one-state recession” for several years, while every other state except those slammed by hurricanes has experienced impressive growth. The causes of Michigan’s recession are complex, but they largely come down to the fact the state is burdened with destructive business taxes, excessive regulations, and bad labor laws that give the state one of the least-competitive business climates in the United States.

While it makes up only 4.4 percent of state spending, the SBT provides 20 percent of the general fund money legislators have the most control over. This explains the apocalyptic pronouncements whenever anyone suggests eliminating the SBT and replacing it with nothing.

Replacement Unnecessary

Patterson’s proposal does not specify a replacement revenue source once the SBT is gone. However, the Mackinac Center has identified almost $2 billion in potential savings in the state budget, more than enough to fill the gap.

Essentially, Patterson proposes a burn-the-fleet, “Proposal A moment,” in which the political establishment throws out the current system with no plan to replace it, as was done with school property taxes in 1993. This is commendable, because there is a consensus that the SBT is a bad tax that’s crippling our economy and the state cannot afford further delay.

Jack McHugh ([email protected]) is a legislative analyst for the Mackinac Center for Public Policy in Midland, Mich. This article is excerpted from a column the center published February 14. Used with permission.