Tuesday, September 21, 2021

Sales tax expansion has little effect on prices overall

October 2, 2007

The state passed a sales tax expansion on some services Monday morning in an effort to reduce Michigan’s $1.75 billion budget shortfall.

The 6 percent sales tax expansion would affect carpet and upholstery services, tour operators, janitorial services, investment advice and other services.

“The effect on most people will be fairly minor,” said Charles Ballard, MSU professor of economics. “A lot of the items that are on the list are items that not everyone buys. If you are the average skier and ski tickets are taxed then it would have an effect, but the majority of Michigan citizens don’t ski and it won’t have an effect on them.”

Like skiing, which is on the service list, travel and reservation services also will tax customers.

However, at STA Travel, 207 E. Grand River Ave., travel adviser Tamara Olton doesn’t think students booking trips will be fazed by the new tax.

“It’s a very small amount in the grand scheme of a vacation,” she said. “For spring breakers and study abroad, it might make them grumble but it won’t affect if they purchase the product or not.”

The tax on services would begin Dec. 1 and is estimated to bring in about $614 million for the remainder of the fiscal year or about $750 million annually, according to The Associated Press.

Gov. Jennifer Granholm told reporters Monday that the Legislature chose the services because they were considered discretionary services, or extras. But for some people and businesses, the services are a necessity.

“Is it a luxury when a homeowner wants to purchase a security system to protect their family? Does the state consider that a luxury? Because that is what they are saying,” said Tricia Kinley, director of tax policy and economic development for the Michigan Chamber of Commerce

Items like security system services, service contracts, warehousing, storage and consulting can be necessities for people.

“A lot of other states have (taxed services) and we didn’t have a choice,” said Michelle Scott, a no-preference freshman. “We’ve got to get the money from somewhere, but they could have done more cut backs in other areas.”

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