The 2010 Michigan Gubernatorial Race is underway and candidates are now preparing for the primary election in August. Each candidate has come out and stated the need for changes in our tax policy, but each candidate also has their own ideas for how this should be done. (Read more for each candidate's tax policy proposals).
Mike Bouchard (Currently Sheriff of Oakland County)
Bouchard has made many statements regarding the need for tax reform in the state. He says there is a need to provide more tax incentives for business. With the Michigan Business Tax, Bouchard wants to eliminate the tax. He has not come out with a solution in how to make up for the estimated $2.2 billion loss if the MBT is repealed.
Mike Cox (Current MI Attorney General)
In September of 2009, Mike Cox released his "Putting Michigan Back to Work" plan for his gubernatorial candidacy (Found here: http://www.mikecox2010.com/putting-michigan-back-to-work/). He believes that the best way to become an attractive state for businesses is to first cut the Michigan Business Tax by 50%, then phasing it out completely. He then wants to enact tax cuts of about $2 billion. He would cut the personal income tax, which he states would benefit workers and entrepreneurs both. The only explanation for how Cox plans to make up for the deficits created by the cuts here is that he will cut state government. He also says that the tax cuts made by these proposals will stimulate the economy and revenue to the government will rise.
Tom George (Current State Senator, 20th District)
George would like to eliminate the 22% surcharge on the Michigan Business Tax. This would then decrease the revenue acquired through the business tax by $500 million each year. To make up for the deficit, George proposes to either reform social spending, or by enacting these cuts, the economy will improve which will generate new revenue for Michigan.
Pete Hoekstra (Current U.S. Representative)
Hoekstra has proposed eliminating the Michigan Business Tax altogether. He believes that it is crucial to cut business taxes in order to become a more business attractive state. Hoekstra has not come out with a clear plan in how he plans on making up for the lost revenue, but proposes that reforms are needed within state government. The state will lose $2.2 billion in revenue if the MBT is completely eliminated.
Rick Snyder (Businessman)
Snyder has a clear plan for changing the tax system on his website. (Find the proposal here: http://www.rickformichigan.com/vision-plan/policy-central/eliminating-michigan-business-tax-mbt). Snyder wants to replace the Michigan Business Tax with a flat corporate tax of 6%. He uses statistics from other states that use a flat rate corporate tax to show their success in business climate. He states that the flat rate will make the tax code much more simplified than it currently is for businesses. Businesses will simply take the taxable income and multiply it by the rate. The problem with Snyder's plan is that it potentially could leave the state with $1.5 billion less in revenue per year. He remedies this by proposing a reduction in what the state spends on public worker's wages and benefits, and scaling back around $30 billion in tax breaks.
Alma Wheeler Smith (Currently State Representative, District 54)
Smith would like to see an elimination of the MBT surcharge of 22%. She would keep the main Michigan Business Tax in place, but raise revenue to eliminate the surcharge. She proposes doing this by extending the sales tax to services, and replacing the flat income tax rate with a graduated tax rate. Finally, she would like to eliminate $3 billion in business tax exemptions. The end result of Smith's proposal is an estimated $6.5 billion in increased revenue, which opponents view as a high tax hike.
Virg Bernero (Currently Mayor of Lansing)
Bernero only announced his candidacy earlier this month and has not come out with a plan as to how he would like to fix Michigan's tax problems. He has come out and said he plans to "Lead the restructuring of Michigan's tax code to make [sure] our state becomes a magnet for new investment and job creation" (http://www.prleap.com/pr/147850/). In the past, Bernero was successful as Mayor in balancing the budget without raising taxes.
The primaries are not until August, so Michigan can expect to see more candidates added and dropped from the race.
The Senate Fiscal Agency is already reporting a deficit of up to $1.8 billion for FY 2011. With the candidates who do not have solutions to provide revenue for their reforms, it may be questionable to propose cuts or new spending when there is already a large deficit.