Michigan’s Legislature voted Friday to repeal the tax on services before it would have taken effect Dec. 1. A possible substitution to that tax could mean about a 33 percent increase in the MBT, which does not go into effect until Jan. 1. The surcharge on the MBT is currently awaiting Senate approval.

“Overall, I think it’s just another blow to the Michigan business community and Michigan business environment,” said Scott Watkins, a consultant with Anderson Economic Group, an East Lansing-based consulting firm. “The surcharge is not a great tax, but it’s a lot better than the service tax.”

MSU, University of Michigan and Wayne State University would not see a tax increase from either the service tax or the MBT surcharge from businesses like Anderson Economic Group, which offer research and consultation services to the universities, Watkins said.

“Those services would still be tax exempt because of their nonprofit nature and tax exempt nature of the universities,” Watkins said.

A possible surcharge to the MBT would have different impacts on various businesses.

“There are some, they are large companies that are supportive (of the surcharge) because the House plan caps out their liability at $2 million, so some large companies have signed off on this,” said Tricia Kinley, director of tax policy and economic development for the Michigan Chamber of Commerce.

“But this would hurt medium-sized companies.”

While the surcharge would begin at 33 percent at the start of January, it is expected to drop to 27 percent in 2009, according to The Associated Press. Lawmakers, who are currently on a two-week holiday vacation, will have to come up with a replacement tax to cover the $750 million the service tax was expected to generate.

“Both are bad and what we would like to see, if the surcharge is the ultimate resolution, is for it to be at a far less rate and temporary,” said Mike Batterby, director of government relations for the Small Business Association of Michigan.

The MBT, which replaced the Single Business Tax, or SBT, has the distinct feature of rewarding companies that place employees and property in Michigan, and it still is not clear if the new MBT will be an improvement from the SBT, Kinley said.

“The surcharge would be on top of that, and I think no matter what you think of the SBT, the surcharge will be a bad idea,” Kinley said. “It’s all the same tax and we’re just talking about piling more on it.”