Walker urges state cuts, reforms

STATE – Legislators are back to work again to try to find an answer to Michigan's revenue crisis. Because the six percent tax on dozens of Michigan services ignited widespread opposition, debate still continues in the hopes of resolving the state deficit.

However, some new alternatives have been suggested. The House voted recently to repeal the service tax and replace it with a 33 percent surcharge on the Michigan Business Tax. That generated mixed feelings.

"There has been a strong initiative to increase taxes," said Rep. Howard Walker, R-Grand Traverse/Kalkaska, "but we need to focus on reductions and reforms first."

Other legislators agreed, arguing that the state should work on cuts and reforms first. In addition, several organizations protested the increase on the MBT, because it would not find favor with multiple types of businesses.

The Michigan Chamber of Commerce argued strongly for the repeal of the service tax, which was supposed to generate $750 million in revenue. It did not support the surcharge on the current MBT.

"We would prefer the tax to be repealed and we'd rather not see any further increase in taxes," said Rich Studley, executive vice president of the chamber. "Any increase of taxes on employers will have a negative impact on jobs in the economy."

However, some believe that the MBT surcharge isn't necessarily a bad idea as the end of the year approaches. One downstate legislative aide, Dave Szewczyk, who works for Rep. Edward Gaffney, R-Wayne, said that it is the best short-term solution.

"Because of the time frame, additional budget cuts are not likely to be made," he said.

Though many small businesses were joined in opposition to the service tax, the MBT surcharge has polarized opinions. "The business community was in favor of repealing the service tax," said Eric Dean, legislative director to Rep. Walker. "But (the businesses) are not unanimous if (the tax) is replaced."

Walker mentioned potential reforms in Medicaid as well as cuts in state employee raises as answers to bringing in some revenue. "We have to maintain less of a tax burden for our citizens, so there is a better chance for our economy to recover," Walker said. BN