How to kill a business tax

Here's the bad news: There are no easy answers to solve the state's looming $400 million shortfall.

But the good news is, there's an obvious way to slay the much-maligned Michigan Business Tax surcharge. The Legislature rushed this 19.99 percent levy on top of the new MBT late last year in the frenzy to dump the service tax, which was deemed even worse.

The surcharge is now the bane of business owners' existence, with 9 percent telling the Michigan Chamber of Commerce they're considering leaving the state over it.

Senate Republicans have passed legislation killing the surcharge and promise to balance the budget with magical budget cuts yet to be revealed. While that might make Chamber members feel warm and fuzzy inside, it's akin to doing nothing because there's no deal with the governor or Democratic House.

Meanwhile, the credit crunch is smacking around our battered economy even more and unemployment is certain to veer into double-digit territory soon.

Republicans are right: We can't afford to keep a job-killing tax.

So I'll defer to an idea proposed by two GOP lawmakers, Reps. Chris Ward, R-Brighton, and Lorence Wenke, R-Richland. Let's snuff out the surcharge and up the income tax a bit, say between 4.6 and 4.8 percent. That'll cost the average family about an extra fill-up a year.

The time to do it is now, because as the deficit balloons next year, any kind of tax cut will be off the table.

Unfortunately, the odds of this happening are nil. Senate Majority Leader Mike Bishop, R-Rochester, isn't budging from his no-tax stance, even if it'll squeeze the business community. House Speaker Andy Dillon, D-Redford Township, is skeptical.

"We'd be sending the message that we're increasing people's taxes to cut business taxes," Dillon told me. "I was willing to do that a year and a half ago. So if Mike Bishop can find those votes and wants to send something over, he's welcome to."

It's true that Bishop could have OK'd this deal during last year's budget crisis and we wouldn't here today.

But the plan hatched by Michigan Republican Party Chair Saul Anuzis and House Minority Leader Craig DeRoche (dear God) was to force as many Democrats as possible to vote for tax increases. That was the key to a GOP victory in '08.

So what was their plan to solve the $1.8 billion budget crisis? There wasn't one.

Astute readers will recall that Republicans actually lost nine House seats on Nov. 4. And the much-ballyhooed recall campaign failed miserably.

Not one legislator lost a seat over the tax hikes. Not one.

Ward just shakes his head. "Not only did we have bad policy, but it turned out to be bad politics, too."

Of course, Ward did lose. Not his seat - he's term-limited - but his GOP leadership post for being a grown-up willing to deal with the pagan Dems to get more budget cuts, less taxes and more reforms.

Oh, well. I'm sure the Chamber doesn't mind. Neither do business owners slapped with 1,700-percent increases in their tax bills.

Negotiating is for sissies.

Anyway, back to this year's budget mess. What's that you say? Can't we just cut fat out of the budget? I'm with you, brothers and sisters.

The income tax for surcharge was really Plan B. What Ward would actually like to see is cutting Corrections (which eat up $2 billion of our $9 billion general fund) in exchange for the surcharge. Gov. Jennifer Granholm first proposed the swap this summer, but she didn't provided specifics.

Now we have the blueprint, thanks to the $800 billion in cuts proposed by the economic development powerhouse, Detroit Renaissance. That's even more than what the surcharge generates, which is about $600 million this year and more than $700 million in years to come.

"It was something that we should have done during the budget crisis," Ward said.

Amen. Unfortunately, leaders don't want to take on politically unpopular reforms ranging from sentence guideline reform to shuttering prisons. Even the governor said it would be impossible to do everything in the last few weeks.

Corrections is the logical place to start. It's the one area of the budget that's been spared from the chopping block. Our prison population has soared by 538 percent in the last three decades and costs have skyrocketed 5,000 percent, according to the nonpartisan Citizens Research Council. With more than 50,000 inmates, Michigan has the highest prison population in the Midwest. The cost of a year in prison is $30,000 per inmate.

Clearly, something has to be done.

This will be the battle of 2009, make no doubt about it. And everyone, from Granholm to lock'em-up Sen. Alan Cropsey, R-DeWitt, is sure grateful that a third-party group, the Council of State Governments, will be issuing a report with cuts they can hide behind.

Everybody claims credit for a tax cut. But nobody wants to be associated with cuts that could let the bad guys out (and more importantly, be used in political ads against them).

Looks like this budget battle could turn out to be as much fun as last year's. Lucky us.

What was the budget war good for? Absolutely nothing

LANSING — It was about 56 minutes into Col. Mike Bishop's quixotic last stand at the Capitol early Monday when one of his GOP foot soldiers crossed enemy lines.

John Pappageorge marched over to fellow Sen. Tupac Hunter on the Senate floor and bellowed, "C'mon, let's go home."

But the Democrat didn't budge, and he didn't vote on the budget."Tell him to stay on the other side of the aisle," he hollered, just a half-hour after the last near-fisticuffs on the floor.

It would be another 26 minutes before the last vote hit the board at 4:18 a.m., much to the chagrin of yawning staffers and reporters.The skirmish was over a new services tax, the first shot Gen. Jennifer Granholm had fired when negotiations commenced in February.

The Democratic governor finally marshaled the troops, first twisting the arm of Republican Rep. Chris Ward on the income tax. Her next target was AWOL Democratic Sen. Glenn Anderson, who was quivering in the back room as a blue-jean-clad Granholm strutted across the chamber.

"Where is he?" she demanded with the moxie of Douglas MacArthur.

She got her man. Seconds after Anderson pushed the button for the service tax, Republicans fell in line and our long state budget nightmare was over.

In bleary-eyed hindsight, Granholm looked to have executed a flawless strategy.

Even consternated conservatives conceded victory after the Dems triumphantly impaled the GOP's no-tax mantra, hoisting a bounty of $1.35 billion in new revenue.

Granholm didn't even bother to hold a news conference right afterward, letting the results speak for themselves.

In reality, she got lucky after months of bitter brinkmanship. And to the victor go the political spoils.Truth is, Republicans couldn't pull the trigger.

Even the GOP-controlled Senate could only muster up $600 million worth of cuts — a far cry from the $1.8 billion deficit. In the end, Bishop had an easier time selling income- and sales-tax boosts to his soldiers than even that level of cuts.

Proving that although Republicans hate raising taxes, they hate cutting spending even more.

Everyone is gung-ho for cuts until they hit home. Then lawmakers aren't so keen on moms, teachers, seniors and CEOs banging on their office doors.

Take the $500 million the House cleaved from business tax breaks. Sounds great until you read the fine print, that without exemptions, Battle Creek's Duncan Aviation would high-tail it out of this state.

The reality is, no one in Lansing truly was itching to raise taxes. It was simple arithmetic. After more than a decade of cutting taxes and raiding funds while the state's economy tanked, the bills came due this year.

Proposals to gash spending fell far short of the deficit, like paring welfare and employee salaries, or were deemed unfeasible, like slashing prisons and schools.

That's because, year after year, we've already chopped higher ed, community health, K-12 schools and child-protective services. State government has the fewest employees since the 1970s.

Michigan's budget doesn't work like the feds', packed full of pork (or earmarks when they're in your district) and can (and does) run in the red year after year.

We don't have that luxury.

Maybe legislators finally had an attack of common sense in the blue hours of Monday morning.Or maybe they were just sick of sleeping in their cars after 17 straight days of battle.

Whatever the reason, Michigan dodged a ruinous government shutdown with the extreme last-minute budget deal — and that is good news for all.

The bad news is, legislators passed a hodgepodge of bills no one's even bothered to read, and they'll now have to spend the next 30 days working out the kinks. We can only hope the flaws won't mean the Wolverine State will face another critically out-of-whack budget next year.

For now, bruised lawmakers have left the battlefield in search of showers and Scotch.They said they were fighting for Michigan — but their backbiting and infighting has only further jeopardized the state's future.

"In a true compromise, no one can claim victory," Sen. Mark Schauer said without a hint of a smile late Sunday night.

After this debacle, no one in Lansing should.