The Detroit News reports that some Democrats, Republicans and public policy experts are saying Michigan needs to take a look at extending the sales tax to cover more services and (perhaps) lowering the sales tax overall by a penny (6 ¢ to 5 ¢) to help offset a projected half billion dollar budget deficit. While a tax on all services would generate close to $9 billion, business-to-business services (engineering, legal services, accounting) would likely be exempt due to the adverse impact that could have on economic development. Likewise, medical services would probably be off limits as well reducing the overall revenue to just under $3 billion.
Michigan taxes 26 of 168 services (ranking 39th in the US) and increasing taxes on services is opposed by most business groups including the Michigan Chamber of Commerce who say it’s a “very bad idea” and that a service tax could lead to reduced competitiveness with neighboring states. Thomas Clay of the Citizens Research Council of Michigan says:
Our tax structure is archaic, obsolete. All that economic activity in the service area is not connected to the tax system. If you had a tax on personal services, you could reduce the rate and have sales tax revenue that would grow in the future.
Read Michigan may tax services in the Detroit News and tell us what you think about such a measure in the comments.