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Michigan's Business Tax has been simplified - and small businesses statewide will be affected.
Businesses used to have to comply with a confusing business tax structure, which included a 4.95% tax, a 0.8% modified gross-receipts tax, and a 22% surcharge.
In a recent move, the Michigan legislature has approved a new tax structure - a flat 6% tax on larger publicly traded companies, eliminating the gross-receipts tax and surcharge.
The tax reforms also brought in a new pension tax and raised income taxes on Michigan residents, reports The Wall Street Journal.
Could Michigan's new tax structure come to your state?
The bill itself barely passed the Michigan legislature. The vote was tied, with the Lt. Gov. Brian Calley breaking the tie in favor of the new tax reforms, reports the AP. Michigan plans to cut down on corporate income taxes by $1 billion beginning October 1st, reports The Wall Street Journal.
This could mean great news for small business in Michigan. "Any assistance to small business like that is just huge because taxes are hard for a small business. The taxes we pay...are killer," says Sandy Vyletel, a winery owner, to the Livingston Daily.
Essentially, since the new business tax structure would only impose the flat corporate tax on larger companies, about 95,000 small businesses in Michigan would only be paying state income tax, according to NFIB.
The hope is that the reduction in business taxes will help small businesses stay afloat, and encourage entrepreneurs to start their own ventures. In a state with high unemployment, the more businesses are in good shape, the more job opportunities there may be.
With state governments trying to balance budgets and maintain jobs, whether or not this simplified tax structure will spread to other states is unknown. After all, any reduction in tax revenue for the state would mean less income and the possibility that the state would have to cut corners some other way.
And, state tax structures vary widely. Michigan's business tax structure may not be too different than your state's business tax - some states have no state corporate income tax, while others have flat rates and variable rates depending on income.
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.