A 2 percent tax on services is what Michigan consumers can expect the next time they go to a hair salon, dry cleaner or movie theater, if Gov. Jennifer Granholm gets her way.
Granholm wants to implement the tax plan by June 1, which aims to help fix Michigan's budget crisis by replacing the Single Business Tax.
"Overall, the tax on services is designed to generate about a billion and a half dollars in a calendar year," said Terry Stanton, spokesman for the Michigan Department of Treasury.
With Michigan's average household income at $57,300, the tax on services would cost about $69 a year for a family of four, Stanton said.
Everyone is not on board with the proposed tax restructuring, and some consider it burdensome for Michigan's citizens and business owners.
"Michigan taxpayers send about $30 billion to Lansing every year, and that doesn't include their local property taxes," said Tricia Kinley, director of tax policy and economic development for the Michigan Chamber of Commerce. "That's an extraordinary amount of money, and if $67 isn't a lot of money, how come they can't cut that out of the state budget?
"To ask taxpayers in Michigan for $1.3 billion more in taxes won't help Michigan's economy."
Granholm's plan starts with the revenue-generating, tax-restructuring plan that could possibly close the holes in the state budget.
"Obviously, the revenues we are proposing will help us invest in schools, public safety and health care services," said Greg Bird, director of the Office of the State Budget.
The solution would exclude heath care, education, college sporting events, religious services, museums, historical sites and a number of other services that have yet to be outlined, Stanton said.
However, administering the tax could be problematic for business owners and job providers.
At Douglas J Aveda Institute, 331 E. Grand River Ave., guest services staff member Marie Lee said the tax might be troublesome for employees since the price of the store's services are in even amounts. The proposed tax would cause possible difficulties with gift cards.
"It would be very odd because of the tax," Lee said. "But if it helps the economy, do what you have to do. It's not too high of an increase for people to be worried about."
It's still too premature to talk about a tax increase, Kinley said.
The process could cause business owners to look at a completely new way of bookkeeping.
"There may be some businesses that don't currently collect a sales tax that would have to make some system changes," Stanton said. "But keep in mind that many of the businesses that would be collecting this excise tax on services also sell goods which are subject to the (6 percent) sales tax."
There also are other services in Michigan that already have a tax like electricity, telephone services and tuxedo rentals, he said.
"This is not a proposal that can be tweaked to work," Kinley said. "Michigan is having a hard time collecting from Internet and catalog purchases. What makes people think that taxing a very complicated system of services that are not as clear cut as tangible services like a sweater will be easy? This is far more complicated than that (6 percent) tax."
