Michigan experienced what many call the “Lost Decade” during Governor Granholm’s administration.  Michigan began to turn around that “Lost Decade” under Governor Snyder and now Governor Whitmer appears to be looking back at that decades policies with admiration.

Governor Whitmer wants to bring back the 6% corporate income tax on most of our small private businesses in Michigan.

Governor Whitmer’s budget is looking to erode some of the advances that were made by Governor Snyder’s 2011 tax code reform.  Under those reforms Governor Snyder scaled back the Michigan Earned Income Tax Credit, and eventually phased out an income tax exemption for pensions and exempted S-corporations and other “pass through” businesses from a new 6% Corporate Income Tax rate.

What is an S Corporation (S Subchapter), Investopedia defines them as:

A Subchapter S (S Corporation) is a form of corporation that meets specific Internal Revenue Code requirements. The requirements gives a corporation with 100 shareholders or fewer the benefit of incorporation while being taxed as a partnership. The corporation may pass income directly to shareholders and avoid double taxation. Requirements include being a domestic corporation, not having more than 100 shareholders, which includes only eligible shareholders, and having only one class of stock.

Most S Corporations are small businesses owned by one individual or a family.  There are approximately 100,000 S corporations in the state of Michigan that would be affected by looking back to the old ways of taxing small businesses.

Governor Snyder exempted those small businesses from the Michigan corporate income tax because they already pay the state's 4.25% income tax on every penny they earn. Thus they were essentially being taxed twice.

Many believe it is one of the key reasons Michigan was in that single state recession for the 10 years leading up to Governor Snyder's election in 2010.  Michigan was unable to respond effectively to the shrinking of our automotive industry and other changes in our economy.

Do we really want to go back to the policies of the “Lost Decade”?

Concerning bringing back this double taxation Patrick Anderson of the Anderson Economic Group stated:

It's still double taxation…For some taxpayers, sometimes and subject to considerable limitations, some portion of state and local taxes are deductible from their federal taxes. But the majority of taxpayers don't even attempt to deduct state and local taxes through itemizing

Mr. Anderson went on to say that bringing back this double taxation on small business:

suggests we’ve learned nothing from the Lost Decade

We have made many advances in Michigan’s economy under Governor Snyder and Republican control of the House and Senate, did you really vote to reverse those positive changes.

By the way Governor Whitmer’s newly proposed 45 cents per gallon hike in Michigan’s fuel taxes has a very little publicized gem in it. Her new tax proposal would actually raise less than the $2.5 billion for roads she is saying.  Why, because $600 million that is currently coming out of the General Fund for infrastructure and she will be moving those funds not back to the General Fund but to Michigan’s educational accounts.  Apparently the wheels are turning and not very straight, maybe her wheels did hit a big pothole on one of Michigan’s roads.

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