Taxable Talk

How would you like to do business in a state where taxes are going up, yet your customers are leaving? And not only are tax rates rising, the state has implemented a tax on services. Welcome to Michigan.

Michigan's new budget has a myriad of tax increases. As I earlier reported, the state income tax increased from 3.9% to 4.35% and the sales tax will now be imposed on services—that's a 6% tax, plus the cost in time and money for businesses to comply with the tax.

The taxes were implemented to balance Michigan's budget. Apparently the legislature in Michigan (and the state's governor) haven't heard about the Laffer curve. When tax rates decrease, tax revenues tend to increase.

Meanwhile, business owners in Michigan are fuming. The Detroit Free Press is reporting that Michigan business owners have begun collecting signatures to have a vote on repealing the new sales tax next November. Oakland (Michigan) County Executive L. Brooks Patterson told the Free Press, "The governor is not in a position to dictate. She’s not entitled to revenue neutrality. Spending is going up. They don’t need that much money here."

Unfortunately, most state legislatures don't believe in cutting spending to balance the budget. Sometimes it takes the people to remind the legislature who they serve. Perhaps Michigan residents will awaken. After all, it's supposed to be government by the people, of the people, and for the people, not for the bureaucrats.