2% service tax will backfire on state funds (Republic: income, jobs)

[Tryntomakealivin]

So... I get a haircut and it costs $18.00 now. I leave a twenty so the 2 bucks is a tip. Do you really think the stylist will be happy taking a 36 cent cut in her tip money? If I were her I'd raise the cost of the haircut. And she will.
And we are being told the tax will cost the average person about what a bottle of soda costs. Oh, really.
I happen to be in the construction field. Most contractors are not set up to be handling a whole bunch of paperwork. They're out there trying to eek out a living by providing a service. They might not be the brightest knob on the radio, but they provide good honest service. For most independent contractors, making out the bill for the work they have provided is about as complicated as they wish to get doing paperwork. So how are they supposed to handle this tax? Should they have their accountant do all of their paper work for them? I - don't - think - so.
Here is what I see happening... The honest tax paying service provider is going to start taking more "under-the-table" work….basically cutting down most of the declared service work throughout the year. When it comes time to declare his or her income...it somehow becomes much less than the previous year. So that 2% tax suddenly turns into a loss for the Michigan Government. Not only that, many good people will just move to a better business climate...where there is no service tax. I'm considering it. I don't need more paperwork.
Try to understand how this tax impacts my little business. I work alone doing home remodeling. Often times the materials I purchase can add up to near the cost of my labor...and I'm not cheap. I provide a service for my clients of not only design and labor...but I purchase these materials as well. Currently, when I buy the materials for a job, I pay the 6% tax on the goods and I offer them as part of my service during the job. I don't have to break down the labor vs the materials. It's a package deal...pay one price and it's done. Now, with the new 2% service tax, I can't do that. If I took the total bill and added 2%, I would be charging tax on materials...not service, and charging tax on tax. I'll now have to buy the customer's materials tax withheld, and charge the 6% tax on materials and 2% on the service. A paperwork nightmare. Or the customer can try to buy the right materials themselves. Either way, it ruins a good thing.
Big businesses are leaving Michigan for obvious reasons. Now the plan is to drive the little businesses out. If this tax passes, Michigan is on a road to ruin. Last one to leave, please turn out the light.

[tuebor]

Thank you, Tryn, for giving us a perspective from an actual service provider. But I'm afraid I don't still quite see what the big deal is. Your bill to the customer is broken down according to labor (service) and materials. The cost of materials is simply whatever you paid for them. That already includes the 6% sales tax--there's no need to compute it again. Anything above that is service, right? On the service, you just add on 2%. How hard is that? As for the paperwork, I don't see why it would be any more complicated than the forms for the 6% sales tax that retailers have to deal with. If they can deal with it, so can service providers. As for under-the-table work, I don't see why this tax would drive a contractor to do under-the-table work if he wasn't already doing so. What am I missing? People are acting like the sky is falling and I honestly don't get it.

To everyone who is upset about this tax: I'd like to hear what public services you would like to give up instead of paying this new tax. It's easy to cut someone else's services, but what services would YOU give up?

Do you want adequate law enforcement and emergency response? Do you want paved roads, and do you want those roads cleared in winter? Do you want to be able to visit the Sleeping Bear Dunes or Pictured Rocks, or would you rather see them sold off to private developers and closed to the public? (Ok, Pictured Rocks is a national park, not state, but the point stands.) Do you want nationally competitive universities and hospitals? Do you want to be able to renew your driver's license without having to drive to another city and wait 2 hours when you get there? There's no free lunch, folks. And for those of you who own small businesses, before you advocate any more cuts to the public payroll, bear in mind that that also cuts your customer base.

But I'll say it again--a progressive income tax would be a better, fairer way to raise revenues.

[ChairborneRanger]

I, for one, don't see how a progressive tax is any fairer than the present flat tax. IMHO, Michigan shouldn't raise taxes at all----in no way, shape or form whatsoever. If "services" are the issue, let the foks who use them pay for them!

[Kingsnkali]

About the last thing Michigan needs is another tax on small business. You might as well put a big sign on the borders saying: "Welcome to the Peoples Republic of Michigan" "We tax you until you leave or die" "Business doesn't create jobs, the State creates jobs".

Yet another sign that Michigan doesn't get it. The perception is your state has nothing to offer but old Union mentality and an anti-business outlook. Let the economic contraction continue until Michigan FINALLY gets it.....

[Rapunzll]

Isn't is convenient that this tax wasn't mentioned until after Granholm was re-elected. I don't understand the mindset of the voters in this state. I plan on moving out of here and it can't be soon enough.

[michiganmoon]

Originally Posted by ChairborneRanger

I, for one, don't see how a progressive tax is any fairer than the present flat tax. IMHO, Michigan shouldn't raise taxes at all----in no way, shape or form whatsoever. If "services" are the issue, let the foks who use them pay for them!

Don't government services benefit us all and wouldn't it be too hard to seperate out who uses it and when? If we all had to pay when we used government services the world would look like this:

-If your house gets broken into and you call the cops have a $200 check ready when the arrive.
-6 year olds who live in poverty couldn't afford to go to elementary school.
-ALL roads would have a toll on them with higher fees in the winter months for snow and ice removal.
-Parks couldn't allow people to walk in or bike in for free.
-Need time talking to a township clerk, that is 20 bucks an hour.

[ChairborneRanger]

Originally Posted by michiganmoon

Don't government services benefit us all and wouldn't it be too hard to seperate out who uses it and when? If we all had to pay when we used government services the world would look like this:

-If your house gets broken into and you call the cops have a $200 check ready when the arrive.
-6 year olds who live in poverty couldn't afford to go to elementary school.
-ALL roads would have a toll on them with higher fees in the winter months for snow and ice removal.
-Parks couldn't allow people to walk in or bike in for free.
-Need time talking to a township clerk, that is 20 bucks an hour.

Well, some of the examples which you cite are just a bit far fetched.

Haven't most folks heard of things called user fees----as in "he who uses it, pays for it"? Start charging fees for entering parks (that's what the Federal Govenment does for the National Parks), charge for highway usage (ever heard of things like the Illinois Through Way, the Ohio or Indiana Turnpike?), or, how about increased Driver's License Fees, License Plate Tabs and Higher Tuition at State Colleges and Universities?

Michigan is in TROUBLE economically----and about the last thing it should be doing is raising taxes.

[michiganmoon]

Originally Posted by ChairborneRanger

Well, some of the examples which you cite are just a bit far fetched.

Haven't most folks heard of things called user fees----as in "he who uses it, pays for it"? Start charging fees for entering parks (that's what the Federal Govenment does for the National Parks), charge for highway usage (ever heard of things like the Illinois Through Way, the Ohio or Indiana Turnpike?), or, how about increased Driver's License Fees, License Plate Tabs and Higher Tuition at State Colleges and Universities?

Michigan is in TROUBLE economically----and about the last thing it should be doing is raising taxes.

Actually, our state parks do the same as the national parks in terms of money. We charge for vehicle entrance, but not foot traffic.

[cassy1]

We moved out of Michigan but I am inquiring because my children still live in Michigan. Does this mean that the sales tax will now be 8%?

[michiganmoon]

No. The "service tax" includes things like movie tickets, hair cuts, business to business transactions, and etc. If you go to Best Buy to purchase a computer it would still be 6%.