Granholm’s plan would decrease the overall sales tax from 6 percent to 5.5 percent while expanding it to cover certain services, including ones that could generate $554 million in the first year, effective Dec. 1. Whether it’s expanding taxes, cutting expenses or the likely combination of both, the state must eliminate a potential $2 billion deficit during the next fiscal year that begins Oct. 1.

Typically, people cut out luxury items during times of economic turbulence, and East Lansing has been the perfect case study, said Sarah Munkacsy, owner of Bronze Bay Tanning, 109 and 617 E. Grand River Ave. She said she lost about 15 percent of her clientele during the recession despite only raising her prices once — by $1 — during her six years in business.

“A majority of my customers are students, and I kept that in mind when I started the business and kept that in mind when I set my pricing,” said Munkacsy, adding she did not raise rates to reflect higher energy and electricity inputs she has incurred. “From what I know about economics, (taxes are) not how we stimulate the economy.”

East Lansing business owners are afraid that people such as Chelsea Yondo, a comparative cultures and politics sophomore, would be less liberal with their wallets if a service tax were enforced. Yondo said she doesn’t like the governor’s solution because it will restrict her usual spending habits, such as going to the movies.

“I haven’t actually thought about (how it would help the state balance its budget); I’m just thinking about how it personally affects me and it is going to affect the things that I like to do,” she said.

The state narrowly avoided implementing a service tax in December 2007, instead opting for a 22 percent surcharge for the Michigan Business Tax that has been the target of criticism from state politicians and business owners.

State Rep. Rick Jones, R-Grand Ledge, said he will not support the plan and that it would be “very hard to pass” given the state’s sluggish economic growth.

“It’s very frustrating working with Gov. Jennifer Granholm,” he said.

“This isn’t what people want. You could go to any coffee shop and people will tell you, ‘We’ve had enough.’”

State Sen. John Gleason, D-Flushing, said he doesn’t expect the 2010 attempt at enacting a service tax to do any better than the 2007 effort.

“We tried it before and it didn’t go very far,” he said.

“I’m terribly disappointed when she throws out a proposal without talking to her Democratic caucus. … We’re the ones who vote on it, she doesn’t vote on it.”

At the same time, however, the state is pressed for options. East Lansing business owners, who already must endure stagnant summer months when most of the student population is away from the city, advocated cutting government spending. Still, the state cannot feasibly cut the amount it needs to balance the budget, and funds will have to come from somewhere as the state copes with the loss of federal bailout dollars.

Matt Kremke, a human resources and labor relations graduate student, said raising taxes during a recession is a “risky maneuver,” but he acknowledged there is no standard prescription for Michigan’s situation.

“It’s not going to be the most popular decision, but at the same time we’re facing very rough economic conditions,” he said. “Drastic measures might need to be taken even if it’s not the most popular decision ever.”