First I want to thank all of you who have been responding to my request from this morning on your thoughts of replacement funds if the services tax is repealed. The response has been over whelming – keep them coming.

Secondly, I want to give you a quick update of what happened Down at the Dome today in regards to the tax on services. The House Tax Policy Committee heard testimony on Senate Bill 845 (Senator Cameron Brown's bill to extend the implementation date of the tax on services). The MAHB made its position known that we support the extension. The bill was reported out of committee and is awaiting action on the House floor.

The Michigan Senate voted to repeal the tax on services by a vote of 23-15 (mostly along party lines). This measure does not include any replacement revenue for the $614 million in revenue lost to the state.

Thirdly, please take a good look at the MBT Surcharge proposal that was emailed this morning and is again linked to this email. Click here to see the brief details. The House Tax Policy Committee Chair Steve Bieda, D-Warren, said his committee will consider on Thursday (TOMORROW) a business tax surcharge intended to raise the same amount of revenue lost due to elimination of the service levy.

It is rumored the surcharge would be 32.9% after December 31, 2007 and before January 1, 2009. After December 31, 2008 the surcharge rate would be 27.3%. Those percentages would be based on the taxpayer's tax liability after allocation or apportionment to the state, but before the calculations of the various credits under the Michigan Business Tax.

"The bill will have a surcharge on the Michigan Business Tax (which goes into effect Jan 1, 2008) and it will also repeal and replace the service tax," Bieda said.

Bieda went on to say there is a chance the full House may act on the bill Thursday. He said it's likely the surcharge would be in the neighborhood of 20-25 percent on gross receipts, mitigated by credits. No business would have to pay more than $2 million.

Stay tuned for more MAHB News from the Capitol. If you have comments on the MBT surcharge, please email your comments to the Chair of the House Tax Policy Committee, Steve Bieda at stevebieda@house.mi.gov and make sure you copy Dawn Crandall at the MAHB at Crandall.dawn@mahb.com. Thanks again for all of your input!