By KEVIN WALKER
Michigan Correspondent

LANSING, Mich. — Last week the governor was given a tax reform plan approved by both the Michigan House and Senate. The plan was hailed by the governor, as well as the Michigan Farm Bureau (MFB).

The main features of the legislation, House bills 4361 and 4362, are the elimination of the Michigan Business Tax (MBT), which will be replaced by a flat corporate income tax of 6 percent and the elimination of most credits.
“Government streamlining and reform are priority policy issues of the Michigan Farm Bureau, and Gov. (Rick) Snyder, Lieutenant Gov. (Brian) Calley and the representatives and senators who supported the tax reform legislation demonstrated tremendous courage and leadership by backing new and innovative approaches to turning around Michigan’s economy,” said MFB President Wayne Wood.

“Farmers are common-sense business people who are respected for applying ingenuity to solve problems and making their own tough decisions on a daily basis. So, Farm Bureau appreciates when elected officials, as exhibited in their support of the tax reform plan, act in similar fashion and deliver on campaign promises to bring about change through unordinary yet sensible and logical measures.”

A spokeswoman for Snyder said he will sign the bills, but no date had been set at press time for the actual signing. He has 14 days in which to sign the bills, starting from May 17 when they were presented to him.
“The Michigan legislature made a powerful statement by passing these landmark reforms,” Snyder said May 12, after the bills passed. “We are making the tough decisions and taking the bold actions necessary to put our state on the path to prosperity.

“Michigan’s complex, unwieldy and unfair tax structure has been a major impediment to economic growth. By bringing greater fairness and simplicity to the system, we are correcting long-standing inequities, protecting low-income families and paving the way for economic expansion.”

Nonrefundable credits eliminated under the legislation include the city income tax credit, public contribution credit, community foundation credit, homeless/food bank credit, college tuition credit, vehicle donation credit and others.

In a compromise with legislators, Snyder agreed to retain the state’s earned income tax credit (EITC), which is 20 percent of the federal EITC. The state EITC is a relatively new credit started under the last governor, Jennifer Granholm.

Under the new law, the state EITC will be 6 percent, but will not be eliminated as Snyder proposed. In addition, most pension income would be taxed under the new law, but he had to make some compromises on that, as well.
Michigan is one of a few states that do not tax most pension income. Under the compromise, any senior 67 years of age or older will not be affected and the plan has a phase-in period, as well.

The film industry tax credit will also be scrapped: Snyder has said the credit is too expensive and not a good deal for taxpayers.

In addition, under the plan the income cap to qualify for a homestead property tax credit will be lowered to $50,000. The current cap is $73,650. Also, a homeowner will not be able to claim the credit if the cash value of the home exceeds $270,000.

Also, seniors could take a hit on the property tax credit changes, because the legislation eliminates a larger credit that seniors can now take, along with the disabled. Under the new law, seniors will be entitled to the same credit as everyone else unless their income falls below $30,000. If their income is under $21,000, they will continue getting as much credit as they do now.

From the MFB’s perspective, the new tax plan will make it simpler for farmers to figure out their tax liability and eliminate the double taxation some face when they have to pay the MBT as well as income tax.

Rebecca Park, a lobbyist for the MFB, described farmers as “price takers, not price makers.” She said the streamlined tax structure will help farmers know what to expect when tax season comes, as well as when they make day-to-day business decisions.

“The business side of things is going to look better for agriculture, to the tune of $11 million,” said Park.