Gypsies, Tramps & Thieves Redux--Fumbling Toward Mediocrity

Well, the Lansing Parliament may actually be getting it right for a change--maybe. This past Wednesday, the Michigan Senate voted 23-15 to repeal a much-maligned (hated, despised, contemptible, vile, loathsome, odious) tax on services, such as business consulting, tanning and graphic design, before it takes effect Dec. 1. We commented on the malodorous tax in an October 2 post. Read it here. The tax deal was passed in the wee hours of the morning on October 1.

As first reported in that missive, this tax was a bad idea. It expanded Michigan's sales tax to certain services, including fortune tellers, phrenologists and, perhaps most importantly, business consulting services. It is these chaps who will take the biggest hit under the tax and be forced to pass the increases on to customers. It was estimated by some that, if allowed to go forward as planned, the tax could cost consulting businesses $500 million. This would help to crush or drive out still more business from the state. Bleeding an already anemic patient has not been an accepted treatment since the middle ages, which is probably when the Governor and the State Legislators last studied economics.

The full State House is expected to follow up this week, perhaps as early as today. At issue is what new plan should be concocted to replace the $614 million the ghastly tax would pour into state coffers this fiscal year. The key to successfully driving a stake through the black heart of the service tax is making up for the revenue that lawmakers and governor Jennifer Granholm have designated for K-12 public schools and law enforcement, along with other government services. It has not occurred to these people that they need to cut costs and unnecessary services rather increase taxes.

Businesses have argued that the tax is confusing and goes a long way toward making Michigan an even less attractive place to do business. A fundamental flaw in the tax is that it is unfair and taxes some services but not others. Most notably, accounting and legal fees are exempt from the tax.

While they ruminate on the solution, the pols have pushed the date when the tax kicks in back from December 1 to December 20. It is hoped that the delay will buy more time for the Legislature to consider alternatives. Time management is not one of the skills for which this Legislature is widely known.

Having learned from hard experience that the legislature can be neither trusted nor counted on to do the smart thing, the Coalition to Ax the Tax, made up of businesses from around the state, has pledged its willingness to collect signatures place the tax on the ballot and let voters decide in November 2008 whether the tax should be repealed if lawmakers fail to kill it. If we simple proles are going to pay the tax, it seems we should get to vote on it.