Manufacturers get a Tax Break

IMPCO.MACHINE.TOOLS

Manufacturers get a Tax Break

by Chris Andrews | Lansing State Journal | December 21, 2005

Michigan's struggling manufacturers soon will get modest tax relief under business tax cuts signed into law Tuesday by Gov. Jennifer Granholm.

The package reduces the taxes that manufacturers pay on equipment by 15 percent and creates incentives for them to move jobs here from other states or countries.

State officials hope it will save jobs. The state has lost more than 200,000 in the manufacturing sector in the past five years.

"What we can guarantee is we are providing a more competitive playing field for manufacturers," Granholm said at a bill-signing ceremony at IMPCO in Lansing Township.

The relief - estimated at $600 million in the next four years - is substantially less than Granholm had proposed in January.

Republican lawmakers balked because the plan raised taxes on insurance companies and some other businesses.

Michigan's unemployment rate, now at 6.6 percent, is persistently among the highest in the nation.

The bills signed Tuesday represent the most significant tax reform enacted since Granholm became governor three years ago.

East Lansing Economist Robert Kleine said he doubted the tax cuts would give a significant boost to Michigan's economy. He said the state's business taxes already are below the national average.

"It's fairly modest," Kleine said. He expressed concern about how the lost revenue would affect state services and education.

David Houghton, president of Industrial Metal Products, said his company would save about $7,000 annually as a result of the cuts. His 75-employee company sells machinery to other manufacturers.

He said the company could benefit indirectly because the new laws lower the taxes of its customers.

"Hopefully, it will be an incentive for more manufacturers to buy more equipment," he said.

Chuck Hadden of the Michigan Manufacturers Association said reducing taxes on equipment is a step in the right direction.

"I think it's going to save jobs," he said.

Granholm renewed her call for the federal government to take action to help manufacturers by enforcing trade policies, challenging currency manipulation and protecting workers' pensions.

"The federal government needs to stop up to the plate," she said.

How Tax Cuts will Help:

MANUFACTURERS:

Michigan has 673,000 manufacturing jobs, down nearly 220,000 from five years ago. The industry generated $39 billion in wages last year.
Manufacturers will get a 15 percent refundable personal property tax credit on equipment beginning next year, saving them $117 million.
They also could get a 100 percent personal property tax credit on equipment related to jobs brought to Michigan. Estimated savings: $20 million in 2007 and again in 2008.

HIGH-TECH COMPANIES:

Gov. Jennifer Granholm has made attracting high-tech companies a centerpiece of her effort to diversify Michigan's economy.
The property tax credit for manufacturers bringing jobs to Michigan also applies to high-tech companies.

STATE-BASED BUSINESSES:

Michigan's Single Business Tax is based 90 percent on sales, 5 percent on property and 5 percent on payroll. Those will change in two steps to 95 percent sales, 2.5 percent property and 2.5 percent payroll.
The new formula shifts the tax burden from Michigan-based companies that have more property and payroll in the state to out-of-state companies whose main presence in the state is sales. Michigan businesses are expected to save $26 million by 2008, while out-of-state businesses will pay about $6 million more.

IMPCO Machine Tools

3417 West St. Joseph Street, Lansing, Michigan USA 48917

Phone: (517)484-9411 Fax: (517)484-0502

Email: Sales @IMPCO.com