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Michigan’s comeback didn’t happen by accident. Businesses have succeeded and grown due to tax reform in 2011 that made our system simple, fair and efficient. These changes put an end to the double taxation that burdened small business owners under the last two tax codes and we have seen small businesses flourish as a result. Business in Michigan is booming and it’s critical that any changes don’t impede on our progress.

This month, Gov. Gretchen Whitmer presented her Fiscal Year 2020 budget recommendations to the Legislature. Unfortunately, the governor proposed a 41 percent tax increase on Michigan’s small businesses. The Small Business Association of Michigan strongly opposes a new tax.

Requiring S-corps and LLCs or “pass-through” companies to pay a corporate tax amounts to double taxation because they already pay taxes on their business income on their personal tax return. The proposal would return Michigan to the failed policies of the past. Our state is home to hundreds of thousands of small businesses that make up most of the employment and employment growth. We can’t afford to cripple these prolific job creators.

Singling out small businesses to pay for other priorities is not in the best interest of our state and would be a major job killer. In addition to the new tax liability, small businesses would be faced with the administrative expense of filing yet another tax return. We are in a great place where hiring is up and companies are growing. It seems common sense that the last thing we want to do is implement policy that would reverse that trend.

Small businesses are the heartbeat of our economy. According to the Institute of Business and Entrepreneurship, more than 437,000 Michigan residents are employed at companies with fewer than 99 employees. This isn’t a small fraction of our residents we’re talking about.

We should be sending small businesses a thank-you note, not a substantially larger tax bill. Small businesses contribute in so many ways, and still more work is needed to ensure that Michigan’s economic resurgence continues. Targeting small businesses is poor public policy and puts our future at risk.

SBAM member Jerry Grubb, owner of Wee Discover Child Care and Enrichment Center in Waterford, says a new small business tax would cause a ripple effect for his business. Tax changes in 2011 helped him save $8,000 a year between CPA fees and the end of double taxation. He was able to put those savings toward higher wages for his employees.

If Whitmer’s small business tax were to be enacted, Grubb would be forced to slow wage increases, decrease hours, reduce the number of staff and even raise tuition rates at his center.

A change like this would lead us back toward the failed tax policies of the past. SBAM is encouraging Whitmer to scrap this proposal and is further recommending that the Legislature not take up this proposal that would be devastating to small businesses.

Brian Calley is president of the Small Business Association of Michigan.

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