Legislators say changes were necessary

By Heidi Roman
C & G Staff Writer

FRASER/CLINTON TOWNSHIP — Michigan legislators recently passed a resolution to deal with the state’s deficit, including a combination of cuts, reforms and new revenues.

Among the changes, about $440 million was cut from the budget, and the teacher healthcare system was reformed. The state’s personal income tax will be increased from 3.9 percent to 4.35 percent, and the state’s sales tax was expanded to a list of services deemed to be discretionary.

Maybe the most controversial part, at least for local businesses, is the 6 percent tax that will be added to services.

“Especially during tough economic times, a vote to raise taxes is a very difficult vote to make,” said state Rep. Fred Miller, D-Mount Clemens. “Families are stretched thin. However, it’s even harder to turn our backs on things that are important to us.”

Miller said that by voting in favor of the cuts, reforms and revenues, he and other legislators were trying to protect significant cuts in healthcare, education and public safety.

The biggest worry of business owners seems to be that those who purchase their services may cut back because of the additional 6 percent tax that will come Dec. 1. At Eye Spy Detective Agency in Fraser, which offers private investigation and uniformed guard services, owner Mike Torrice fears the agency’s clients will simply reduce the number of guards used.

“And this is at a time where security should be increased,” Torrice said. The 6 percent tax will be tacked on to both the private investigation and guard service.

“We provide security for a mall, and that mall is on a yearly budget,” he said. “They’re simply going to knock 6 percent off the bill.”

Torrice wondered how legislators chose the seemingly random list of services that would be taxed.

The list includes skiing, but not golfing, for example. Business-to-business services like commercial landscaping, document preparation, and carpet and upholstery cleaning are on the list, along with services like palm reading, astrology services and dating services.

“People don’t like the sales tax, and say there are a lot of inconsistencies,” said state Sen. Michael Switalski, D-Roseville, about the list. “I’m happy to make a change, but if you’re going to take $200 million out of it, you’d better bring me $200 million to put into it.”

Switalski said of all the proposals that came forward, this was the one that was able to make it through the Legislature.

“You can’t just make wholesale changes to something at the last minute and expect the majority of people to back it,” Switalski said.

The hodgepodge of services included in the tax is restricted to amenities, Miller said, or services people have a choice over whether or not to purchase.

“Our economy has changed over recent years, and now over half of the economy in Michigan is service-based,” he said. “Our economy is moving in a certain way, it just makes sense that … our tax code reflect that change.”

The resolution is causing some confusion among businesses, some of which are wondering which of their services will fall under the new tax. At the Little Wedding Chapel on 13 Mile Road in Fraser, owners wondered how they would be affected by the new resolution.

“I have to see it in black-and-white,” said owner Carmen Pozniak. “Hopefully, they’ll put some guidelines out there for us. I’m a little confused.”

Hundreds of services are performed each year at the chapel.

A manager at Gina’s Salon and Spa on Garfield in Clinton Township, Sandy Mastrianni, said the 6 percent tax on massage services is going to have the biggest impact on the salon, and especially the employees that make their living by performing them.

“They’re worried people won’t get as much done,” Mastrianna said, “Nobody’s happy about it. It’s going to cost more.”

Switalski said the new tax on services will generate about $606 million a year. He and Miller agree that the decision to raise taxes was not one taken lightly.

“It was a tough decision, but that’s what I was sent to do,” Miller said. He’s spoken to constituents on both sides of the issue — those who are opposed to the new taxes and those who felt it was a necessary resolution, he said.

Already the Small Business Association of Michigan has begun rallying legislators in an attempt to get the new sales tax on services repealed. The association is asking small-business owners upset about the tax to visit www.fightservice tax.com.

To view a full list of services that will be subject to the 6 percent tax, visit the Michigan Department of Treasury’s Web site at www.michigan.gov/treasury.

You can reach Staff Writer Heidi Roman at hroman@candgnews.com or at (586) 218-5006.