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Posted on Thu, Feb 17, 2011 : 12:07 p.m.

Rick Snyder proposes big cuts to business taxes, elimination of credits for film, high-tech industries

By Nathan Bomey

This story has been updated several times with additional information.

Michigan Gov. Rick Snyder this morning proposed that the state enact a wholesale reconfiguration of its business tax structure, cutting overall tax rates, making the process simpler and completely eliminating most of the tax credits that benefit specific industries.

Under Snyder's official budget proposal, the state would eliminate the controversial Michigan Business Tax and replace it with a flat 6 percent corporate income tax, which would equal a $1.8 billion tax cut. That's a proposal he's been discussing since the early days of his gubernatorial campaign.

Some 95,000 companies — mostly small business owners who pay taxes through their personal income tax return — would no longer have to pay business taxes under this proposal.

Snyder also would cut most of the tax credits the state offers to individual industries, including the film industry credits, advanced battery credits, the controversial Michigan Economic Growth Authority (MEGA) credits for high-tech companies, the brownfield redevelopment credits and tax-free renaissance zones. Snyder emphasized that companies that have already received tax credits would get to keep them.

Snyder said existing credits would be cut but that he would turn around and include $75 million in total incentives to be distributed by the Michigan Economic Development Corp., including $25 million for the film industry.

To offset lower overall business tax receipts, Snyder is proposing a wide range of spending cuts that would hit higher education, K-12 education and municipal governments. In addition, Snyder wants to eliminate most individual income tax exemptions, including the exemption that protects senior citizens from paying taxes on their pension income.

Snyder described the reconfigured tax structure as necessary for creating jobs, eliminating a projected $1.4 billion deficit and achieving a sustainable state budget. He also hinted that he plans to pursue reform of the personal property tax, which requires companies to pay taxes on the equipment used to do their business, such as computers and manufacturing machines. It's a "fundamentally unfair situation and it needs to be addressed," Snyder said.

"The day of kicking the can down the road is ending," Snyder said in Lansing, according to streaming video of his presentation to a legislative committee.

The budget proposal is sure to kick off a firestorm of debate over Michigan's fiscal health among legislators, interest groups and voters. Snyder wants the state Legislature to pass the budget by May 31.

Snyder's plan would replace the lost income from the business tax reform with a litany of changes, including $1.7 billion in new revenue from changes to individual income taxes.

Under the plan, the state's individual income rate would decline from 4.35 percent in 2010-11 to 4.25 percent in 2011-12, as previously scheduled.

But the income tax rate would be extended to all pension income, which is currently exempted from taxes. Social security income would not be taxed.

The plan would also phase out the personal income tax exemptions for single filer earning more than $75,000 or joint filers earning more than $150,000. It would also eliminate the Earned Income Tax Credit for lower-income taxpayers and reduce the homestead property tax credit.

The proposals drew swift condemnation from Democratic legislators.

“Governor Snyder’s idea of shared sacrifice seems to mean that working families will do most of the sacrificing while companies continue to reap the rewards,” State Sen. Minority Leader Gretchen Whitmer, D-East Lansing, said in a statement. “He is balancing this budget on the backs of our kids, working families, and our seniors. Contrary to his rhetoric about ‘moving all of Michigan forward’, this budget picks out who he’s willing to leave behind.”

Senior citizen advocates also derided the proposal, saying it would hurt seniors who are living on a fixed budget.

"AARP intends to fight this budget proposal on behalf of its 1.4 million members," AARP Michigan spokesman Mark Hornbeck told "Basically what our members get out of it is a huge tax increase and reduced services in exchange for a business tax cut, which we don’t see as a fair or balanced plan."

Hornbeck acknowledged that Michigan is "an exception to the rule" — most states do tax pensions — but said the group is altogether disappointed with the governor's proposals.

"If you’re going to reform taxes, you need to do a balanced job. You can’t just single out seniors for huge tax increase and not share the burden among all groups, including businesses out there," he said.

Snyder said he understands the significance of the tax changes and that his administration conducted a "thoughtful analysis" to determine what changes to make.

"This was a very difficult exercise," Snyder said. "From a personal perspective, these were tough calls to make. Many of us are going to have to sacrifice in the short term. But I can tell you with confidence, with conviction, by making these sacrifices, we can all win in the long term."

Snyder, a multi-millionaire and former Ann Arbor venture capitalist, said he would take a salary of $1.

His budget proposal would essentially remake the MEDC, which has historically focused much of its attention on distributing tax incentives to growing companies in alternative energy, advanced manufacturing, life sciences and other industries.

The elimination of the MEDC incentives has drawn support from business groups like the conservative Michigan Chamber of Commerce.

"Governor Snyder has identified out-of-control state spending and a job- killing business tax as substantial barriers to job growth and he has proposed bold changes to make Michigan more competitive," Michigan Chamber CEO Rich Studley said in a statement. "Governor Snyder has set the tone that we must take responsibility for a legacy of debt and his budget and tax initiatives are devised as long-term solutions."

But other groups, including the film industry and manufacturers, have expressed concern about Snyder's proposed cuts.

MEDC CEO Michael Finney said in an interview that the budget proposal would lead to a simpler tax structure that would boost the economy.

"As proposed, it solves our state’s structural budget problem," Finney said. "That’s good news for the overall economic prosperity of our state."

Over the years, many companies with Ann Arbor area offices have benefited from the high-tech MEGA tax incentives Snyder proposes to eliminate. They include companies like Google, Barracuda Networks, Arbor Networks, MyBuys, AVL Powertrain, ForeSee Results and Sakti3.

But critics have said the MEGA incentives are too costly and that the companies that receive them often don't add the number of jobs they promised.

For example, Google got MEGA tax credits in 2006 after promising to create 1,000 jobs in Ann Arbor by 2011. Today, the company has only 250, though the company said last month that it plans to continue adding employees this year.

During former Gov. Jennifer Granholm's eight-year administration, the MEGA board distributed more than $3.5 billion in tax incentives to more than 500 companies, according to a list of tax credits MEDC provided to in September.

Studies by the Anderson Economic Group and the Mackinac Center for Public Policy concluded that the MEGA program has been a waste of government resources, while a competing study by the Upjohn Institute said the tax incentives are worthwhile.

"We are eliminating all those credits," Snyder said today. "We will honor past credits, but it is time for simple, fair and efficient on the business side."

Proponents of the MEGA tax incentives pointed out that companies that received the credits only got tax relief if they actually hired the workers they promised to hire. The state does not cut a check for companies when they make their original hiring promise.

Meanwhile, the state spent about $100 million in 2009-10 on its film industry incentive, which provides a cash rebate of up to 42 percent of a production company's spending in Michigan. As a result of film productions, the state got an influx of $10.3 million in additional taxes, according to a Senate Fiscal Agency study in September. Film companies directly hired 355.5 full-time workers in 2009, activity that resulted in a total of 1,542.2 overall full-time jobs in Michigan, the agency estimated.

Although the film incentives result in a net loss in tax revenue, advocates argue that the job creation and the film industry's attractiveness to young people made the incentives worthwhile.

Finney said the film credits are not sustainable in their current form. He said a set pool of $25 million for film incentives was more appropriate.

"It is an effort to manage it more reasonably than we have right now, where there’s an open checkbook with no cap on it. Hopefully it will allow the industry to grow here in the state," Finney said.

Contact's Nathan Bomey at (734) 623-2587 or You can also follow him on Twitter or subscribe to's newsletters.



Sat, Feb 19, 2011 : 6 p.m.

Another perspective on Tricky Rick's desire to help the business climate in Michigan: My wife and I, both retired and living on pretty much fixed incomes, were thinking seriously of doing some remodeling work on our condo. It seems that such a move would not only improve our condo, but would also provide more than a little work and income for some local business. With Snyder's proposal to raise our taxes and to reduce business taxes to improve the business climate in Michigan, we are rethinking our plans. Now if you were a business, would you prefer to have a customer providing you with income to be taxed or, conversely, a lower tax on income you will never receive? Your choice business. How does Rick's "business friendly" proposal look to you now?


Sat, Feb 19, 2011 : 2:39 p.m.

Mr. Snyder is just applying normal business stratigies to our State budget...reduce resources to the "losers" in the budget (the poor; public institutions; subsidies to new industriest etc) and giving more resources to the "stars" (industry and small business who have the potential to show a profit). Why are we surprised? Well, the "losers" are real people not just cost centers. Our Governor needs to balance his approach and consider that a role of GOVERNMENT is to protect the most vulnerable, to supoort education of our children and to lead in a balanced and fair way.


Fri, Feb 18, 2011 : 10:25 p.m.

Government policies ALWAYS pick winners and losers. Snyder cannot pretend that his budget doesn't do so. Snyder's policies: - Businesses win (no matter what they produce, what pollution they create) - The wealthy win - Fixed income elderly lose - Low income workers lose - Nascent industries (film, batteries) lose - Students lose Granholm deserves CREDIT for bringing the battery and film industries to MI. - The battery industry is a pollution-saving industry of the future. It fits with our fading auto industry. It is proper that we should help this to launch in MI. - The film industry is non-polluting and good for our state in many ways. Reduce the support to realistic levels, but please keep it going!


Sat, Feb 19, 2011 : 4:25 a.m.

Larry J has got it correct! The new Gov has proven himself to be a plain old conservative pro business politician to promote their needs ahead of all of the people. Big tax cutes to business do not produce a lot of new jobs they just make businesses richer. If Snyder wants to be the Gov for all of the people then put together a system that is fair to all and not have winners and losers. It can be done. Larry's comments about Gov. Granholm are right on.

Edward Vielmetti

Fri, Feb 18, 2011 : 6:43 p.m.

@BernieP links to this table from the Census: S2001. Earnings in the Past 12 Months (In 2009 Inflation-Adjusted Dollars) Data Set: 2009 American Community Survey 1-Year Estimates Survey: American Community Survey


Fri, Feb 18, 2011 : 6:40 p.m.

Does it matter whether the income being taxed is earned? <a href="" rel='nofollow'>;-context=st&amp;-qr_name=ACS_2009_1YR_G00_S2001&amp;-ds_name=ACS_2009_1YR_G00_&amp;-tree_id=309&amp;-redoLog=false&amp;-_caller=geoselect&amp;-geo_id=04000US26&amp;-format=&amp;-_lang=en</a> &quot;Lies, damn lies and statistics.&quot; --- BD


Fri, Feb 18, 2011 : 2:57 p.m.

i worked on a film in michigan for 2 months last summer. if there is not a film to work on this summer, i might have to sign up for unemployment. i think about 70% of our 100 person crew were from michigan and many of those that were not living here were looking into buying homes here.

John Q

Fri, Feb 18, 2011 : 2:28 p.m.

&quot;Appears to me that many working families will see a small CUT in taxes.' Low income families are losing the earned income tax credit so most will pay more in taxes, not less. &quot;Low income seniors with pensions would not pay tax due to exemptions... The &quot;gimme&quot; mindset has to stop. Google agreed to hire 1,000 and then didn't. They should pay the state back. MyBuys gets a tax exemption for tech but the jobs are first-time sales jobs with low salaries. I am not a Republican, but this mindset has to stop.&quot; Lots of false statements here. There is no exemption for pensions. Those seniors will absolutely pay taxes as Snyder is also eliminating the exemption for those 65 and older. Google only gets tax credits for jobs created. There's nothing to pay back. If they didn't create 1000 jobs, they didn't get credits for 1000 jobs. How about getting educated instead of spouting falsehoods?

Ed Kimball

Fri, Feb 18, 2011 : 1:47 p.m.

As a member of the &quot;fixed-income&quot; (i.e., retiree) crowd, I have long felt that the Michigan tax code is unnecessarily generous to those of us whose income is &quot;fixed&quot; but still more than adequate. My wife and I are willing to pay more in taxes to help balance the budget. But the Governor asked for shared sacrifice. I see us sharing the sacrifice with the poor, students in school (both K-12 and college) and the employees who serve the public. How are businesses sharing the sacrifice? They certainly share the benefits of a public who can afford their goods and services, an educated work force, and public safety workers. But, according to the budget, their taxes are going down by $1.8 billion! Sure, the government is phasing out the tax credit to filmmakers, but on last night's news I heard the state Budget Director explain how the state will make up much of the difference. The budget says that &quot;Governor Snyder believes Michigan can no longer afford to exempt any segment of the population from supporting an equitable share of public services.&quot; Aren't business owners a segment of the population?


Fri, Feb 18, 2011 : noon

Low income seniors with pensions would not pay tax due to exemptions... The &quot;gimme&quot; mindset has to stop. Google agreed to hire 1,000 and then didn't. They should pay the state back. MyBuys gets a tax exemption for tech but the jobs are first-time sales jobs with low salaries. I am not a Republican, but this mindset has to stop.


Fri, Feb 18, 2011 : 4:39 a.m.

I didn't vote for this decorated warrior for the wealthy class.

Doug Gross

Fri, Feb 18, 2011 : 4:11 a.m.

We have a couple of choices: 1. Reduce taxes on corporations in the hope that if corporations see a lower and more understandable tax structure they will choose to locate and stay here. As a result our children have jobs and pay taxes 2. Keep taxes low for seniors, continue to tax the corporations at high rates and bemoan why our children don't have jobs and corporations are moving out. Seems to me Rick Snyder made the right choice. Seniors that don't care about their kids and are too cheap to stay and pay taxes should move elsewhere. Just remember that if you move anywhere else in the Midwest that the other states already tax seniors; we have been the foolish exception to the rule that everyone should pay their fair share. By the way, why isn't the federal government so enlightened as to not tax seniors? They understand, everyone has to pay their fair share.

Ed Kimball

Fri, Feb 18, 2011 : 1:54 p.m.

We have more than a couple of choices. We could make the new tax rate for businesses high enough that it doesn't cost the state $1.8 billion in revenue that could go to education, infrastructure, and public safety. We could lower the sales tax and raise, not lower, the income tax, to raise more revenue from those who can afford it and less from those who can't. By the way, the operative word in your first choice is &quot;hope&quot;. Is there hard evidence that Michigan's tax rates are costing us jobs, or is it only ideology?


Fri, Feb 18, 2011 : 4:10 a.m.

&quot;Under the plan, the state's individual income rate would decline from 4.35 percent in 2010-11 to 4.25 percent in 2011-12, as previously scheduled. But the income tax rate would be extended to all pension income, which is currently exempted from taxes. Social security income would not be taxed. The plan would also phase out the personal income tax exemptions for single filer earning more than $75,000 or joint filers earning more than $150,000. It would also eliminate the Earned Income Tax Credit for lower-income taxpayers and reduce the homestead property tax credit.&quot; ------------------------------------------------------------------------------------------------------------------------------------ Appears to me that many working families will see a small CUT in taxes. Go NERD Go !

E. Manuel Goldstein

Fri, Feb 18, 2011 : 12:41 a.m.

Many seniors will vote with their feet. So will many young people. Two of my three sons are already planning to move out of state to find work, they can read the writing on the wall. The third hopes to go to college in-state, but now that even looks iffy. Rick Snyder, and the republican dominated legislature will deserve recall by the time this is done. Right now, I would invest in precious metals: gold, silver, and lead

Macabre Sunset

Thu, Feb 17, 2011 : 11:54 p.m.

Since we're among the nation's leaders in unemployment and we're the only state in the union losing population, it's time to set a tax structure more in line with other states. We need to have a fair and stable climate for businesses in Michigan. Up next, reforms to public employee compensation like the ones being proposed in Wisconsin this week.


Thu, Feb 17, 2011 : 11:23 p.m.

It won't be long now. Soon, the State of Michigan will be as viable as the Gateway Corporation.

Jay Thomas

Thu, Feb 17, 2011 : 8:42 p.m.

The return we are getting on the $100 million a year to the film makers is worse than I thought.

Emma B

Thu, Feb 17, 2011 : 8:25 p.m.

Oh Good. Let's eliminate the film tax credit that gave a handful of my student friends jobs. Now they'll all move to California and further contribute to the &quot;brain drain&quot; problem.


Thu, Feb 17, 2011 : 8:21 p.m.

I wonder if the people making comments read the document or only the article here. There are lots of cuts in lots of areas. Not many of them are any fun and they all hurt someone. We don't have unlimited money. We also don't have as many &quot;rich people&quot; as folks would like to think we do. Too many of the UAW Skilled Trades folks who made great money on overtime in 2005, make that kind of money any more. For truly rich people, if you look at Forbes and their list of the folks with real money, very few are here in Michigan. Roughly $13 billion of $46 goes to Education, large portions go to Medicare and Medicaid, Almost a billion goes in constitutional revenue sharing to the local governments. I am happy to pay some more money in taxes. One of the issues that the state is stuck with is the Health Care Reform Act of 2010 dumped a bunch of unfunded requirements on the state, as did other Federal programs. Every time the Federal Government does that, Michigan has to find the money somewhere. One change I would like to see in the state budget is asset sales, the state and federal government own most of the land in the UP, it is time to put that land to work.


Thu, Feb 17, 2011 : 8:18 p.m.

WOW, I believe that our one-term governor and our former (hopefully) UM prez are in cahoots with their definition of what is faIr; that is, where the rich get more rich and the poor get more poor They both have now shown their true colors - and they ain't True Blue.

John B.

Thu, Feb 17, 2011 : 9:03 p.m.

...and that surprises you at all because....?


Thu, Feb 17, 2011 : 7:18 p.m.

Is anybody surprised? Cut education and tax the retired to give tax breaks to businesses on the assumption that they will spread the wealth through their generosity to their employees. Does anybody recall this ever working? It sounds to me that this is entirely for the benefit of state government, not the citizens of Michigan. I'm seriously considering going elsewhere for the first time in my life.


Thu, Feb 17, 2011 : 9:26 p.m.

Why not tax the retirement of public employees. My retirement will be taxed. Needs to be fair across the board.

E. Daniel Ayres

Thu, Feb 17, 2011 : 8:14 p.m.

You're not alone. We have lived and paid taxes in Michigan since 1968. My wife retired from public school teaching after 35 years. The company I worked for put me out on the street by going belly up back in the later part of the 1990s and I never was able to recover but stayed in Michigan because of her situation, taking lower paying jobs, etc. Now they tax our retirement? What I'm afraid of is that the tax will be applied even if we move since it is paid out by the state.


Thu, Feb 17, 2011 : 7:14 p.m.

&quot;The proposals drew swift condemnation from Democratic legislators&quot; I guess that's why Verg (the angry Mayor) didn't win the governship! Tuff times require Tuff measures. 1)The rich always get bigger tax cuts because they pay the most taxes! 2) The reaso why the Poor are always the ones who get hurt is because they do not contribute anything, they take other people's money! 3) Pensions should be taxed because they are State Residents too! and they deserve to be treated as such. No second class status for seniors!\


Fri, Feb 18, 2011 : 6:41 p.m.

don't get old or sick.

Atticus F.

Thu, Feb 17, 2011 : 9:16 p.m.

XMO, we should be looking for ways to turn poor people into middle class people... Not looking for ways to make the rich richer, and the poor poorer.


Thu, Feb 17, 2011 : 8:28 p.m.

Well said XMO! Here comes reality people, hang on it's not going to be fun but is needed.


Thu, Feb 17, 2011 : 6:40 p.m.

These are not tough choices , they are the easy targets like the poor, elderly and retired people's lifetime labor. Standard operating procedure for CEO's think. People don't matter - only the business and bottom line.

frances franklin

Thu, Feb 17, 2011 : 6:32 p.m.

Elimination of credits for film, high-tech industries is STUPID! Taxing retirement pay is unconscionable. Blech!

Atticus F.

Thu, Feb 17, 2011 : 6:27 p.m.

Looks like the majority of the tax cuts will be given dirctly to the wealthy. While all of the programs cut will be taken from the poor, the elderly, and from investing in our future(advanced battery credit).


Fri, Mar 11, 2011 : 2:19 a.m.

The plan would also phase out the personal income tax exemptions for single filer earning more than $75,000 or joint filers earning more than $150,000. How's that a tax cut?


Fri, Mar 11, 2011 : 2:15 a.m.

The plan would also phase out the personal income tax exemptions for single filer earning more than $75,000 or joint filers earning more than $150,000. How's that a tax break?


Thu, Feb 17, 2011 : 6:06 p.m.

i think all the people that server the people are a bunch of nuts. hit the people that are retired. not all of us have 1 mill to retire on. we watch our $$$ now you watch them for us. make sure the people that serve us take cuts also. sure they will.