State Senate GOP bets proposal that gives firms long-sought tax ......

State capitol powerbrokers are grappling over three different proposals for business tax relief. Whose plan do you think is best?

-- With bankruptcies threatening Michigan's economy, Senate Republicans offered a plan Monday to slash business taxes by at least $483 million over the next six years and slap limits on state spending growth.

The proposal, which Senate leaders intend to pass today and move to the governor's desk by Nov. 11, could lead to a long-awaited accord on an economic recovery plan to rescue the only state in the nation that had a net job loss last year. As of September, only Alaska and hurricane-ravaged Louisiana and Mississippi had unemployment rates higher than Michigan's 6.4 percent.

Gov. Jennifer Granholm and lawmakers have been haggling over business tax reforms and a job investment plan for eight months, but the stakes for Michigan are growing rapidly as automakers, major auto parts suppliers and other manufacturing firms feel increasing stress on profits and payrolls.

The Senate plan follows earlier proposals by Granholm and House Republicans and is drawing criticism from Democrats and some economists. It would gradually ratchet down the corporate tax rate and provide additional relief if state tax receipts grow by more than the inflation rate plus 1 percent.

Some of the cuts would be offset by closing tax loopholes and offering a one-time amnesty program for delinquent business taxpayers.

Assuming state tax revenues outpace inflation over the next few years, this proposal could net up to $1.9 billion in cuts for businesses by 2010, according to a Senate Fiscal Agency analysis.

The plan sharply contrasts with a reform package crafted by Granholm earlier this year that would target a large chunk of business tax relief to manufacturers and pay for it by raising rates on insurance companies, banks and other service industries. A plan passed by the House this summer calls for steeper business tax cuts that would not be linked to state revenue growth.

"The economic challenges we're facing in this state are of a fundamental and permanent nature," said Senate Majority Leader Ken Sikkema, R-Wyoming.

Granholm did not condemn or endorse the Senate plan but raised some concerns.

"It does not provide the relief to manufacturers that our plan did," she said.

Asked about capturing future revenue growth above inflation for business tax cuts, Granholm asked: "Do we want to say any spending growth in the future will not be invested in our people?"

House Speaker Craig DeRoche, R-Novi, said the House plan calls for deeper business tax relief.

"Tax relief for job providers needs to be immediate and meaningful," DeRoche said in a prepared statement.

"If the Senate passes this plan to the House, I am anxious to work with Sen. Sikkema to finalize a tax cut that will help put people back to work now."

Economist Patrick Anderson called the Senate tax reform package "inadequate."

"We have some of the highest business taxes in the country raising about $4 billion a year, and this provides maybe $50 million to $100 million a year in relief," Anderson said. "If Michigan is going to change its economy to attract business, it is going to need much more tax relief than this."

Business leaders said they're still trying to figure out the complex proposal. They're worried about linking much of the tax relief to increases in inflation.

"Businesses are wary of indexing because the economy and the budget can change so much from year to year," said Rich Studley of the Michigan Chamber of Commerce. He added that the Senate plan is far more complicated than a House version that offers straightforward cuts.

Chuck Hadden, chief lobbyist for the Michigan Manufacturers' Association, said the Senate package provides a smaller cut on business equipment than the governor's proposal, a major concern for the Big Three automakers and other major manufacturers.

Democratic critics said the proposed limits on government spending could cripple programs such as Medicaid health care coverage for the poor, which has seen cost hikes well above inflation for several years.

Spending for education and revenue sharing for police and fire protection, garbage pickup, road repair and other services in cities, townships and counties also could be curtailed, they said.

Sikkema said the spending limits would force state government to live within its means.

"When we ask people whether government should be able to get by on inflationary increases plus 1 percent, they ask 'What's the 1 percent for?'" he said.

Democrats also took issue with the notion that cutting business taxes is the best way to revitalize the state's languishing economy.

"After six years and $2 billion of prior business tax cuts, all we have to show for it is companies that took the money and ran and a state that is hampered in its ability to compete in a new economy," said Senate Minority Leader Bob Emerson, D-Flint.

Under the Senate Republican proposal, the single business tax rate would be cut by six-tenths of a percent on Jan. 1, netting $35 million in relief the first year. The reduction would amount to $52 in the second year.

Over six years, the tax rate would drop from the current 1.9 percent to 1.5 percent and possibly lower if state revenues outstrip inflation. Under the governor's plan, the tax rate would be immediately cut from 1.9 percent to 1.2 percent, and the House proposal would decrease the rate to 1.7 percent over five years.

Starting in 2007 under the Senate proposal, businesses also would get the first $50 million of state revenue growth in excess of inflation plus 1 percent. Any growth greater than that would be split between business tax cuts and the state's rainy-day fund.

Also Monday, Granholm fired off a letter to Michigan's congressional delegation calling for federal help in propping up U.S. manufacturing. .

This is cache, read story here