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Tuesday, October 2, 2007

Michigan Will Tax More Services

Michigan enacted changes to its sales tax that expands it to cover 23 additional services starting 12/1/07 (HB 5198 signed 10/2/07). The services now subject to sales tax include:
  • landscaping
  • bail bonding
  • balloon-o-grams
  • astrology, palm reading, fortune-telling and numerology
  • coin-operated blood pressure testing machines
  • party planning
  • house sitting
  • shoe shining
  • wedding planning
  • packaging and labeling
  • skiing
  • travel and reservation
  • courier and messenger
  • personal care except hair care
  • personal fitness trainer
  • personal shopper
Thus, the state is better recognizing that the sales tax is a consumption tax and services are a type of consumption (not only tangible personal property can be consumed). They are also recognizing that as consumer spending on tangible goods decreases while consumption of services an intangibles (including digital downloads) increases, changes are needed to preserve the sales tax base. For more information on modernizing state sales tax, see my report and recent op eds - here.

Hopefully Michigan will provide technical and financial assistance to the businesses that must start collecting, reporting and remitting sales tax as it can be a bit complicated, require new software systems and assistance of tax professionals. Many of the businesses that will need to start collecting sales tax are probably calendar year businesses. One thing that would have made the new task a bit easier is for it to start on January 1 rather than December 1. That's not much time to get ready in either case though (causing headaches for both businesses and the Michigan Department of Treasury).

Michigan also raised its income tax from 3.9% to 4.35%. These changes were made to address a budget deficit. (more from Traverse City Record Eagle)

What do you think?

3 comments:

Ian said...

What has happened is that Michigan - under liberal, central-planning leadership that seeks to pick "winners and losers," - has pressed for bigger and bigger programs, costing more and more tax dollars.

Business - the Golden Goose that provides jobs - has been choked, and is wobbling to get out from under the choke hold by crossing the state line.

Michigan consumers have been paying business's taxes in HIGHER PRICES, a neatly hidden tax that the politicians figured could go on forever.

When Michigan chose Jennifer Granholm, after the first miserable four years, instead of a person who understood about how Golden Geese propagate, what did they expect? And to add insult to injury, they gave the Michigan House away to poltical types that feel oh so comfortable taking from the producers to build a captive constituency.

There is a long-term solution for Michigan voters: It's called scrapping the Michigan Income Tax, and enacting the Michigan FairTax. Under the FairTax, Michiganders, visitors - even illegals - will pay for government the way Michigan working families are paid, when something is sold.

Under a Michigan FairTax, no more politicians' hands in our family paychecks; no more politicians' hands in our business checkbooks. No more income tax code to harass families with audits, interest, penalties, even confiscation of personal property.

Under a Michigan FairTax consumption tax, Michigan families pay for government in the process of meeting their family's needs. And every Michigan resident family will receive an advance monthly reimbursement on taxes expected to be paid on poverty-level spending based on family size. Thus, it is a progressive tax system, yet voluntary because it will apply only on new retail purchases, not used, and on services.

The Michigan FairTax is a revenue neutral proposal that will put Michigan workers in charge with information on the cost of Michigan government on every retail receipt! And, the politicians will no longer be able to pit poor against rich, individual/family against business.

Celia said...
This comment has been removed by a blog administrator.
muthu said...

Hi,
The Michigan FairTax is a revenue neutral proposal that will put Michigan workers in charge with information on the cost of Michigan government on every retail receipt! And, the politicians will no longer be able to pit poor against rich, individual/family against business.

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