Senate Passes Temporary Replacement for Service Tax

Today (Tuesday, November 20, 2007) the Senate passed a proposal to replace the expanded sales tax on services with a temporary business tax surcharge on a 20-16 straight party-line vote.  The House passed a different version just over a week ago, drawing criticism that the surcharge is too great and that the burden is disproportionate. 

The Senate-passed version (Senate substitute for House Bill 5408 (S-4)) cuts the surcharge by less than half of what the House passed and lifts the cap on taxes any one company is required to pay by more than triple what the House recommends.  The Senate substitute sunsets the surcharge in calendar year 2011. This Senate version does not replace the entire revenue that the service tax would generate.  It also makes fundamental changes to the newly passed Michigan Business Tax.

Today’s Senate action on HB 5408 leaves open the possibility of continued dispute on resolving the issue before the tax takes effect on December 1.

The Senate-passed substitute for HB 5408 and available analysis are attached.