Local business owners are hoping they won't have pay up when the Single Business Tax expires in December.
Halfway through the fiscal year, the state will lose $1.2 billion in revenue.
State officials have been developing proposals and restructuring the tax system to make up for the loss. The Single Business Tax brings in $1.9 billion in revenue for the state, said Greg Bird, spokesman for the Office of the State Budget.
Gov. Jennifer Granholm has proposed replacing it with the Michigan Business Tax. The tax would be applied to a broad base of businesses with a low tax rate and would eliminate a tax on payroll, benefits and health care.
"The Michigan Business Tax would generate about $1.5 billion," said Terry Stanton, spokesman for the Michigan Department of the Treasury.
Business organizations such as the Michigan Business and Professional Association, or MBPA, and the Michigan Food and Beverage Association, or MFBA, had been hoping a replacement would not be needed.
"We want simplicity," said Bonnie Bochniak, MBPA's director of government relations. "We want something that will attract new businesses to Michigan and keep the same people we have."
The MBPA is looking for a replacement that would give tax cuts for small businesses and be revenue-neutral, Bochniak said.
Richard Liscombe, owner of Footgear, 108 Division St., said as a small business, he pays a lot of taxes but understands it's what the state needs.
"Taxes are a necessary evil," Liscombe said. "I hear people complain about taxes, but they don't complain about garbage pickup and road repairs."
The Michigan Business Tax would provide a $250 million tax cut for small businesses, cuts for in-state businesses, about $600 million for Michigan businesses and a headquarters credit, Stanton said.
"It's also important to note that Michigan's businesses would remain below the national average," he added.
Many small businesses also would be exempt from the tax, similarly to the way the Single Business Tax exempted them, Stanton said.
If businesses make more than $350,000, they still would be subjected to the tax. For example, a business that grosses $353,000 would only be taxed on the additional $3,000 grossed.
