Michigan Service Tax Repeal (2008)

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The Michigan Services Tax Repeal did not appear on the November 4, 2008 statewide ballot as a legislatively-referred state statute. The measure called for the rejection of a 6% tax on services passed by the Michigan Legislature in October of 2007.

Despite not appearing on the ballot, the effort was strong enough to force the legislature into repealing the tax only two months after its passage.[1][2]

Michigan Rally against Taxes


The services tax was decided on October 1, 2007, around 4 am when an inability to balance the budget forced the Michigan government to shut down. At this time the income tax was increased to 4.35 percent, the sales tax increase and teacher's benefits reduced.[3] Northwest Airlines and other manufacturers have also supported the plan.[4]

The services tax was set to be implemented on Dec. 1, 2007, but was repealed by the state legislature under great pressure from taxpayers, just hours after it became effective.[5]

Support of the Services tax

Governor Granholm had publicly endorsed the tax and had said that she would not sign a repeal for the tax until another viable solution was offered.[6]

In place of the 6% service tax, the repeal agreement called for a 22% surcharge on the state’s new business tax, which went into effect Jan. 1, 2008.

Tax Backlash

Soon after the tax was passed both large and small businesses began to protest it.

The Ax the Tax Coalition was formed and it gathered signatures for petition to repeal the tax.

This devastating tax might have made sense in the world of politicians, our coalition live and works and employs people in the real world, where this tax will hurt Michigan’s economy and force more jobs to leave Michigan.

According to an article in the Lansing State Journal:

Many businesses consider the tax confusing and unfair, with some warning it will cause them to lose business to out-of-state competitors or have to leave the state themselves.[7]

Ax the Tax also worked with the Detroit Renaissance Inc., an organization that consists of high-powered executives, to defeat the service tax.[8] Vice President of the Small Business Association of Michigan (SBAM), Michael Rogers also worked with the group to collect the 304,000 signatures needed to have the repeal put to a vote.[9]

The Michigan Chamber of Commerce reported that 90 percent of respondents for a poll supported the repeal of the service tax.

The Michigan Taxpayers Alliance and the Mackinac Center for Public Policy[10] have both condemned the tax.

The investment community also became involved in urging the repeal, including:[11]

  • Financial Services Institute in Atlanta
  • Financial Planning Association in Denver
  • This group has hired lobbyists to advocate the repeal in Lansing.
  • National Association of Personal Financial Advisers in Arlington Heights, IL
  • Securities Industry and Financial Markets Association in New York and Washington
  • The Investment Company Institute
  • Certified Financial Planner Board of Standards inc. in Denver

Inspires initiative effort

As a result of this proposal, Michiganders launched a petition to change Michigan to a part time legislature in order to cut spending and balance the budget.[12]

Rep. Kenneth Horn (R), said "if the petition drive does lead to a public vote on service taxes next November, no politician who supported the tax will be safe."[13]

Legislature moves to repeal

House Democrats soon rushed a bill through the House to repeal the service tax and replace it with a larger increase on the Michigan Business Tax. House Republicans refused to vote for it, objecting to the Democrats' refusal to even consider the idea of cutting $650 million from the state budget.[14]

The Senate refused to approve the bill, with the deadline for the tax's enaction rapidly approaching.[15]

Just 17 hours after the tax took effect, Gov. Granholm signed HB 5408 for the tax's immediate repeal.[16]

See also

External links