TAX ALERT – Michigan Governor Snyder Releases 2011 Executive Budget Proposal

Budget Proposal Includes Anticipated Proposals to Change Both Tax and Spending Policies

Michigan Governor Rick Snyder called the consideration of his proposed Executive Budget a "defining moment" for the state this week as the Executive Budget was submitted to state legislators for the 2011-2012 fiscal year. Snyder commented on his budget as an opportunity to "stop living in the past and start looking to the future."

As expected, the lynch pins of Snyder's plan call for the reduction of business taxes by in excess of 1.8 billion and a significant reduction in spending on public schools, universities, local governments and prisons. If passed, the plan will have an immediate impact on the state's businesses by providing a replacement of the existing Michigan Business Tax with a 6% flat tax on corporate income with some exemptions for designated small businesses. Other parts of the proposed Executive Budget call for an elimination of various business tax credits and replacing the credits with grants from the Michigan Development Corporation.

The Executive Budget also provides for maintaining the already scheduled reduction in the state's individual income tax rate from 4.35% to 4.25% which is set to go into effect October 1, 2011. Further scheduled reductions to the individual tax rate would be eliminated. In addition, the proposal calls for the elimination of many other existing credits, deductions and exemptions.

While the proposed Executive Budget is far from being a reality and enacted into law, the stage has been set for the debate of how the new administration in Michigan will seek to solve the state's economic difficulties.

Please stay tuned for more updates on these matters as the debate and ultimate actions to be taken unfold.

Dan A. Penning