Something to think about as statewide petitions for this proposal are being prepared:
The Michigan Fair Tax Proposal (1-18-08)
The Michigan Fair Tax Proposal would completely replace the Single Business Tax (SBT), Personal Property Tax (PPT), 6 mill business School Education Tax (SET) tax, and Michigan Income Tax with a single sales tax. As a result, you would only pay tax on the final purchase. All business-to-business transactions would be exempt. Michigan citizens make nearly all their purchases with after-tax dollars. In a Fair Tax environment, all purchases made by Michigan citizens would be made with pre-tax dollars because there would be no Michigan payroll or income tax withholding. Sales tax would go up 3.5 cents, but residents would now keep 4.35 cents more on every dollar they earn, which is currently taken from their check and sent to the state. People will only pay tax on what they purchase. Thus people with higher incomes, who buy more things, will pay more tax and people who donâ??t will pay less. At 9.5 percent, Michigan citizens would actually realize a .85 percent reduction on every dollar used for a purchase; the current rate is 6 percent. The nine states that have no state income tax are able to subtract their sales tax from their federal income tax liability. There are already tables in the 1040 for states that do not have a state income tax.
The Michigan Fair Tax would export a greater portion of our tax burden to non-residents who travel to and vacation in Michigan; we are a destination state for vacationers. We have a huge underground or cash economy in our state; in addition to the illegal economy, we have an illegal alien problem as well. All economic activity would be taxed in a Fair Tax economy; if you live here you will get taxed on whatever you buy. In Barronâ??s January 3, 2005 edition, Jim McTague wrote, â??The IRS estimated that its tax gap --the estimated amount of taxes owed minus the amount collected -- to be $311 billion in any given year. â??The agency will produce a new estimate in 2005, it could be as high as $400 billion,â?? says former IRS Commissioner Donald Alexander. The gap number measures only a portion of the underground economy. Because the number is extrapolated from audited returns, it makes no allowances for criminal enterprises that report no income, and it even fails to capture some garden varieties of non-reporting. The unreported wages of illegal immigrants alone could be costing the government another $50 billion a year.â? Michiganâ??s uncollected tax liability is $2.5 billion. This number has not been factored into the Michigan Fair Tax Proposal as of yet. A conservative estimate would be that the Fair Tax would automatically cut the uncollected liability 75 percent or more, which is 40 percent of what the PPT and SBT generated.
This would not be a regressive tax nor would it cause the poor to pay any more taxes than they currently pay, because of the prebate (refund). Currently, Michigan citizens have personal exemptions to offset state income tax according to the number of people in their household. In a Fair Tax environment, Michigan citizens would automatically receive a rebate of their sales tax in a manner similar to the personal exemption from the income tax. All Michigan citizens would receive a monthly rebate to offset additional items such as food and services which would now be taxed. A single Michigan citizen would receive $950 (9.5% of $10,000), the rebate would increase as it does now with the number adults and children. A family of four earning $28,000 would pay no tax. Someone who earns minimum wage would pay little or no taxes. On the other hand, people who have or make more money will purchase more items and will pay more taxes. If that same family of four made $60,000 they would not be spending $28,000 on necessities. So the pre-bate un-taxes necessities and does not hurt low income earners.
The new tax plan passed in June doesnâ??t change much; it simply reshuffles the same old deck and shifts the burden of who pays more and who pays less. We will still have a gross receipts tax of .8% (which the people rejected when they over-rode the governorâ??s veto of the SBT), a personal property tax (which every state around us has eliminated); and also added a third business tax, an alternative business income tax. The goals which were set three years ago were: broaden the base, simplification, tax equity, create a system which is easy to adhere to, and make it inviting and competitive to attract new businesses to Michigan. So what have we really accomplished? We have simply painted the room, re-arranged the furniture, shuffled the deck on who pays, and called it tax reform.
Governor Granholm wanted a 1.5 billion dollar tax increase. Under threat of government shutdown, she unfortunately got the state legislature to raise income tax 12%, and spread sales tax to many services at a rate of 6% on both the consumer and business-to-business transactions, which were on top of all the other taxes. There was such an out cry that the services tax was repealed and a 22% surcharge for ten years has been added to the MBT. No matter how you structure a state mandated tax or who initially pays it, whether applied to business like the SBT and the PPT, or directly applied to citizens, like sales and income tax, the consumer will ultimately pay it. Businesses donâ??t pay taxes, people do. All taxes, no matter what their form, are incorporated into the price of the products and services people buy.
Raising the sales tax 3.5 cents would require a constitutional amendment. The amendment would repeal any statewide tax enacted after January 1, 2007, and no other statewide tax could be restored, or enacted, or the sales tax amount increased without a vote of the people. The ballot amendment would also add counties along with townships, cities, and villages to the constitution and combine the constitutional and the statutory Revenue Sharing distributions into one, making the entire distribution constitutional, giving municipalities a number they can budget on.
Elimination of the Personal Property Tax, Gross Receipts Tax, and State Income Tax would make Michigan the least expensive, least cumbersome, easiest to comply with, and most competitive state in the nation. Manufactures will greatly benefit and many will relocate to Michigan in order to take advantage of the lower cost of doing business because of the favorable tax structure.
Michigan Treasuryâ??s own projections are saying unemployment, and the business environments are going to get worse, not better. There is no other plan or proposal that would lower the cost of doing business, spur capital investment, or create a more inviting environment for job growth. The time for action is now. Missouri, Georgia, and Oklahoma have all introduced Fair Tax legislation in their legislatures this year, and other states are working on their own versions. On May 3, 2007, I introduced the Michigan Fair Tax Resolution L with 36 co-sponsors, which is over a third of the state legislature. The Michigan Fair Tax Proposal is on its way to becoming a state-wide ballot initiative. It would constitutionally restrain government from imposing any new statewide taxes without a vote of the people. It would make government subject to the same economic up turns and down turns as its businesses and its citizens, and allow people to pay tax only on what they purchased. Now what could be fairer than that? (For more information go to www.fultonsheen.us or www.mifairtax.org )
Fair Tax
Moderator: Gillespie