Capitol, Landing MI by Irina Vasiliu

Below you'll find a news release from Governor Granholm regarding an agreement to add a 21.9% surcharge to the new Michigan Business Tax to replace the 6% Michigan Service Tax.

The Detroit Free Press and Detroit News have details on the agreement as well.

Granholm, State Lawmakers Agree to Replace Service TaxReplacement Helps State's Fiscal Stability

Protects citizens from massive cuts to public safety, health care, education

Governor Jennifer M. Granholm, Lt. Governor John D. Cherry, Jr., Senate Majority Leader Michael D. Bishop, House Speaker Andy Dillon, and Senate Democratic Leader Mark Schauer along with legislative members have agreed to replace the service tax that went into effect at 12:01 a.m. today. Under the agreement, revenue generated by a service tax will be fully replaced by a surcharge on the Michigan Business Tax (MBT).

The State Senate is expected to complete work on the tax package in the early hours of this morning and the State House is expected to approve it later today. Under the agreement businesses will be granted legal protection if they fail to collect the service tax until effective date of the new law.

"This agreement protects health care, public safety and education while replacing revenue from the service tax," said Governor Granholm. "I applaud the members of the business community and the legislators who worked with us to craft this fair and responsible compromise."

Senator Bishop (R-Rochester) offered the following statement: "I appreciate the spirit of compromise to repeal a tax that would have devastated Michigan business. It is only through continued good faith negotiations, compromise and dialog that we can set Michigan on a track for renewed economic prosperity."

"These negotiations were very difficult due to our challenging economic climate, but I am confident that this agreement is a fair compromise that will allow the state to provide the services necessary to support our businesses and attract new businesses to a state that has a tremendous quality of life," said Speaker Dillon (D-Redford Twp.). "I commend Michigan's business community for their willingness to step up and work towards a solution."

"By working with the business community and each other, we reached a compromise that gets rid of the service tax and keeps our promises to fund schools, public safety, and health care," said Senator Schauer (D-Battle Creek). "This is the type of reasonable approach that will protect our priorities and position us for economic growth."

Under the agreement, the replacement for the service tax will phase out under certain economic conditions.

The MBT, which takes effect January 1, provides tax cuts for more than 60 percent of Michigan businesses and provides tax cuts to both small businesses and Michigan's major manufacturers, while encouraging job creation in Michigan.

The MBT helps stimulate Michigan's economy by relying more on profit, providing tax credits to companies that locate or create new jobs in Michigan and tax credits for entrepreneurial and R&D activities. In addition, a significant cut in the personal property tax will help the state's largest employers and commercial businesses.

"With this agreement in place, we can continue working on the economic plan that will help grow our economy and create jobs," said Lt. Governor Cherry.

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