The state legislature and Gov. Jennifer Granholm hammered out an agreement last week that would provide for more than $3 billion in funds for job creation and a cut in the small-business tax.
The bills would cut the tax by 0.05 percent starting in 2009.
By cutting the small-business tax, employers can create more jobs statewide and help the economy, said Ari Adler, spokesman for Senate Majority Leader Ken Sikkema, R-Wyoming.
"One of the things we need to do in Michigan is become more competitive with our taxes," he said. "We want to try and diversify the economy."
Businesses that focus on technology and life sciences research, in addition to Michigan's manufacturing industry, will all be helped by this agreement, Adler said.
Granholm's spokeswoman Liz Boyd said the governor is pleased with the agreement and that it will provide incentives for employers throughout the state. More funding for start-up companies in addition to giving struggling manufacturers a 15 percent refundable personal property tax credit will be provided.
Cutting taxes in difficult fiscal times isn't always the right thing to do, economics Professor Charles Ballard said.
"I understand the perspective of those who are in favor of this proposal," he said. "In my view, we have carried the tax cutting too far. This kind of thing has great potential to move us further in the wrong direction."
However, one local business owner said he feels any tax cut is helpful.
"I would guess they are looking at businesses that are considerably large. Any tax cuts are certainly beneficial," said Gary Ignat, owner of Iggy's Deli, 623 E. Grand River Ave.
More ideas need to be considered when looking at how to fix the state's economy because it can affect several other things, Ballard said, adding that there are some structural problems with Michigan's tax system.
"The proportion of income in Michigan that goes to state and local taxes is lower than it has been for decades," he said. "That is the big reason the tuition has been going up so rapidly."
Bill Sepic, president of the Lansing Regional Chamber of Commerce, said the cut to the small-business tax looks good overall and could provide the necessary relief that businesses need.
"It looks like it was a pretty good cut," he said. "It appears as though it will have some immediate relief as well as longer-term relief."
Reaching the agreement wasn't easy because there were so many different proposals and sides to consider, Adler said.
"You had different ideas from the governor, the senate majority leader and the house speaker," Adler said. "The governor, senate majority leader and speaker spent many hours trying to find a compromise.
"Part of having a representative government is having the executive and legislative branches work together."
