Lansing — Gov. Jennifer Granholm announced Wednesday a replacement for a business tax accused of inhibiting economic growth in Michigan.

Although ridding Michigan of the Single Business Tax is a positive step for businesses, Granholm's proposed replacement is not perfect, MSU professors and a local business owner said.

Still, Crunchy's bar owner Vivian Milligan said it might be a change for the better.

"You never know what the repercussions will be," she said. "As a small business owner, it would be appreciated."

The SBT, a near $2 billion revenue generating policy set to expire in 2007, is levied on businesses with total income of more than $350,000. The tax is based on a business's total income, including compensation — such as wages and health care — and revenues. Critics of the SBT have argued that it is a disincentive for employers to hire more people and expand their businesses because they would be taxed more.

Granholm's replacement tax, called the Michigan Business Tax, would be based mostly on profit, excluding currently taxed payroll or health care income.

Businesses earning less than $350,000 in gross receipts are still not subject to the tax. Businesses earning between the minimum amount and $700,000 would be given a portion of the tax rate based on the amount of profit, making a smoother transition than with the original tax.

"The Michigan Business Tax is a simple, fair, stable tax that has been built on the principles I've been articulating," Granholm said Wednesday morning in a press conference.

"We want to lower the rate, flatten the base and remove the unusual provisions of the Single Business Tax — make it more reliant on profit and eliminate the reliance on compensation."

Gross receipts will be taxed at 0.125 percent, and profits will be taxed at 1.875 percent.

The more businesses make, the more they're taxed, according to the plan. Right now, the more they expand, the more they're taxed.

Although the end result will be a near $150 million-net tax cut for businesses, the proposed tax is expected to generate the same amount as the Single Business Tax.

Granholm said some previously exempted businesses would be taxed under the plan, and insurance companies might need to pay a higher tax while automakers might receive a cut.

"It is revenue-neutral to ensure the citizens aren't told to pony up and pay education, health care and public safety costs," Granholm said. "When times are good, (businesses) pay a little more and when times are bad, they pay a little less."

Although critics say the governor's tax plan is better than the Single Business Tax, they add that it won't be the cure for the ailing economy that people expect.

The potential plan would merely shift the burden of taxation and wouldn't really help the economy, said MSU James Madison College Associate Professor Bryan Ritchie.

"At the end of the day, tax policy is not the policy that encourages business growth anyway," he said. "It doesn't strike me as a strategic growth plan. It strikes me as a revenue-generating plan."

MSU economics Professor Charles Ballard said the governor's replacement plan is good in the fact that it replaces all the revenue from the Single Business Tax. But lasting effects, such as employment or prices, won't be significant, he said.

"Particular individuals and businesses will see an effect right away," Ballard said. "Those who previously did not pay will definitely see an effect right away. We could do much better, but I don't think this would do huge aggregate damage either."

A tax replacement bill is waiting in a joint committee, and the governor is urging the Michigan Legislature to pass the bill before the year ends. That gives lawmakers about two weeks to vote on the bill.

Rep. Dianne Byrum, D-Onondaga, said current legislators know about taxes and the issues surrounding the Single Business Tax. Lawmakers have more experience dealing with the issue than the more than 30 new legislators who will begin their terms in January, she said.

"The lack of certainty and the kind of economical struggles Michigan faces is not helpful and not healthy for our state," she said. "It's the best public policy for Michigan, and it can be done in the next three weeks."