LANSING―Historic tax reforms signed Wednesday by Gov. Rick Snyder will make Michigan more competitive for jobs and bring greater fairness and simplicity to the state’s tax system, said Sen. Darwin Booher, who attended the bill signing.
“This landmark reform charts a new course in how we do business. Most importantly, it will help spur Michigan’s economy and create long-term jobs,” said Booher, R-Evart. “We are finally replacing the job-killing Michigan Business Tax with a simpler tax that will improve the state’s business climate. This will position Michigan to be strongly competitive in attracting new investment and job creation.”
Public Acts 38-45 of 2011 eliminate the MBT, simplify the tax code, level the playing field among taxpayers and protect low-income families.
Under the new laws, which take effect Jan.1, 2012:
- The MBT is replaced by a 6 percent Corporate Income Tax. The tax applies only to companies that file as “C” corporations – typically, those that issue stock. Nearly 100,000 small businesses will no longer be double taxed and will now file as individuals.
- Numerous credits, deductions and exemptions are eliminated.
- The income tax rate is frozen at 4.35 percent until Jan. 1, 2013, when it is lowered to 4.25 percent. Among Great Lakes states, only Indiana’s flat rate of 3.4 percent is lower.
- A three-tiered system determines whether retirement income is taxed. People born before 1946 will continue to receive the current retirement income exemptions, as well as the personal exemption, Social Security exemption and the exemption for dividends, interest and capital gains.
- Firms wishing to take advantage of previously issued certificated credits may choose to continue paying the tax until their credits are exhausted. The most common certificated credits include brownfield redevelopment, historic preservation, battery, film and Michigan Economic Growth Authority credits.
The changes take Michigan from 30th to 16th in the nation in terms of lowest state and local business tax burden, according to the Council on State Taxation. The state’s corporate income tax rate will be the lowest in the Midwest. In addition, Michigan will have the 14th lowest personal income tax burden among the states that have a broad-based personal income tax.
Editor’s Note: A print-quality photograph of Booher at the governor’s bill signing is available on the senator’s photowire.