The 6 percent service tax was repealed by the Michigan House of Representatives on Saturday, two months after legislators introduced the tax to alleviate the state budget deficit.
The tax will be replaced by a 21.99 percent surcharge to the Michigan Business Tax, which will be implemented Jan. 1.
The service tax would have hit businesses such as downhill skiing sites, tanning salons, travel agencies and consulting firms. With Michigan automakers relying heavily on consulting firms, the service tax would have affected the Big Three automakers as well.
The 21.99 percent surcharge, however, will produce $600 million this fiscal year and $750 million in 2008-09 as the state attempts to eliminate its $1.8 billion deficit. The surcharge will last until 2017.
Michigan senators negotiated for weeks about a compromise between the Democrat-proposed 33 percent and Republican-proposed 13 percent surcharges. The two sides agreed early Saturday morning on 21.99 percent.
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