Michigan Developments
Eric Rule,
Director of Governmental Affairs

MRA opposes unfair ‘tax on a tax’
When the recently enacted Michigan Business Tax (MBT) replaced the Single Business Tax (SBT), questions began to arise regarding how the new tax would handle sales taxes collected and remitted.

According to the Michigan Department of Treasury, gross receipts includes sales tax, and a retailer would be subject to the 0.8-percent gross receipts tax on the 6-percent sales tax collected and remitted to the state. Essentially, this is a tax on a tax.

A package of bills aimed at clarifying the definition of gross receipts—introduced at the request of MRA and other business groups—passed in the Senate along party lines, 21-17. It now faces an uncertain future in the Democratic-controlled House.

Senate Bill 1038, sponsored by Finance Chair Nancy Cassis (R-Novi), is the flagship bill of note to retailers. The bill would remove taxes or surcharges levied on a business from the definition of gross receipts in the Michigan Business Tax.

Treasury opposes the package, claiming it would cost the state hundreds of millions of dollars. MRA will make the case to House members that if this isn’t fixed, the cost to the state resulting from businesses leaving the state would be much greater than the potential revenue losses associated with the fix.

Prepaid cell phones become issue again
MRA was successful recently in defeating a proposal to require retailers to collect a 911 funding fee when selling prepaid wireless phones and cards. Now, legislation has been introduced seeking to require retailers to collect driver’s license information and store this data for six months when selling such products.

The legislation is reportedly an attempt to help law enforcement track suspected drug dealers. House Bill 5591 has been referred to the House Judiciary Committee.

Penny plan resurrected for recycling
A plan to charge a penny for each retail transaction over $2 to fund statewide recycling programs was recently introduced after it failed to pass in the last legislative session. Rep. Michael Sak (D-Grand Rapids) introduced the bill.

A small business exemption in the bill states that any business that makes a good faith estimate that it will collect less than $20 in recycling fees in a month or will have fewer than 2,000 transactions in a month may choose not to collect the fee. Businesses that collect the fee would reimburse themselves by adding the cost of the recycling fee to the cost of each sales transaction. A fee payer may retain 0.75 percent of the recycling fee for administrative costs.

The bill is an effort by some grocery and soft drink industry representatives to avoid an expansion of the bottle deposit law to include juice, water and other containers. Most other business groups support the bill as well.

State of the State Address emphasizes jobs
Governor Jennifer Granholm hit hard upon the theme of bringing jobs back to Michigan in her January State of the State Address. After stressing that she will not raise taxes or fees in 2008, she spoke of investing heavily in the state’s future, with $2 billion in new programs—apparently paid for by bonding, securitization and refinancing.

In the effort to put Michigan in the forefront of the alternative energy industry, the governor said the two major utility companies in the state, Detroit Edison and Consumers Energy, are prepared to invest nearly $6 billion in alternative energy technology, creating 17,000 jobs. Unfortunately, it appears that Granholm may be offering the utilities a return to their monopoly status in exchange, thereby eliminating Electric Choice, a program that helps retailers and other businesses save on electricity.

MRA keeps eye on vague fingerprinting bill
Local units of government would be allowed to fingerprint individuals involved in certain occupations for background checks by the State Police if House Bill 5543, introduced by Rep. Richard LeBlanc (D-Westland), is passed.

The bill is thought to be aimed at occupations such as daycare, foster homes and teaching; however, it does not specify this. MRA will be watching the bill closely to determine if it will impact retail.

Update from Washington
James Goldberg,
MRA Washington Counsel

Tax ‘train wreck’ looming
Whoever wins the 2008 presidential election may enter the White House with the very real possibility of a looming tax “train wreck.”

First, President Bush’s tax cuts expire in 2010; if they are not extended, some $2 trillion in new revenue will come streaming into the federal treasury.

Second, virtually all Washington observers acknowledge that the alternative minimum tax (AMT) must receive a permanent “fix.” Enacted in 1986 to provide that the wealthiest Americans would pay at least some income tax, the AMT was never indexed for inflation and has now started to bite middle-class taxpayers.

A one-year respite was adopted late in 2007, but Congress must come to grips with a long-term solution. The cost of giving up the AMT altogether: $1 trillion.

Third, even Democrats acknowledge that the current corporate income tax rate—the second highest in the world—is helping to drive American businesses offshore. House Ways & Means Committee Chairman Charles Rangel (D-NY) has floated a tax reform plan that would lower the corporate rate and eliminate some corporate tax “benefits,” such as the last-in, first-out (LIFO) method of inventory accounting used by many retailers.

Fourth, and what has been regarded as the “third rail” of American politics, is halting the increases to costs of programs such as Social Security and Medicare.

Some form of major tax reform—perhaps akin to the 1986 rewrite of the Internal Revenue Code—may be the only feasible solution. One proposal that the retail community will resist strongly is the replacement of the IRS Code with the so-called “flat tax” or some other version of a consumption tax.

Those old light bulbs will be relics
The comprehensive energy legislation signed by President Bush at the end of last year includes a phase out of the incandescent light bulb starting in 2012.

The 100-watt bulb will be the first to be banned, with other sizes being outlawed over the succeeding years.

Nearly one million ask for TV-converter coupons
Nearly one million households have requested $40 coupons for converter boxes with which old television sets can receive digital signals after the U.S. abandons analog broadcasts next year.

The program started January 1 and the first coupons went in the mail on February 17. Consumer electronics retailers should be prepared for questions regarding the coupon program (see article on Page 1).

The coupons can be redeemed at a number of retailers who register to participate in the government’s program. Retailers will be selling the converter boxes in the $60-70 range. Coupons expire 90 days after issue, so individuals seeking them should be prepared to use them promptly on receipt.

On February 17, 2009, all U.S. television stations will cease transmission of analog signals and convert to digital-only signals. The converter boxes are only necessary for non-digital TV sets that are not connected to satellite or cable transmissions. Individuals who use satellite or cable providers should check with their provider to determine what type of converter box, if any, would be required.

Regulatory Flexibility Act set to expand
The House Small Business Committee has approved legislation expanding the scope of the Regulatory Flexibility Act (RFA) by requiring federal agencies to analyze indirect impacts of their proposed rules.

RFA mandates that federal agencies consider the potential economic impact of proposed federal regulations on small businesses and examine regulatory alternatives that achieve the agencies’ public policy goals while minimizing impact on small entities.

While the legislation is an improvement over the current situation, MRA is working with the Small Business Administration’s Office of Advocacy to seek further amendments.

The first such amendment would strengthen an existing requirement that federal agencies periodically review existing rules for their impact on a substantial number of small entities. The second would make permanent a provision in presidential Executive Order 13272, which requires agencies to notify SBA’s Advocacy Office of draft rules that would have a significant economic impact on a substantial number of small businesses.