Governor Snyder's 2011 Executive Budget Proposal Released: Contains Much-Anticipated Proposals to Change Both State Tax and Spending Policies

Legal Alerts

2.13.11

In what he called a "defining moment" for the State of Michigan, Governor Snyder presented to state legislators a proposed budget for the 2011-12 fiscal year that reduces business taxes by $1.8 billion and dramatically cuts state spending on public schools, universities, local governments, and prisons. "This is more than a budget or tax proposal," Snyder explained, "this is an opportunity to stop living in the past and  start looking to the future."

Noteworthy aspects of the plan include:

  • Replacing the Michigan Business Tax with a 6% flat tax on the income of corporations, with a limited exemption for small businesses.
  • Maintaining the scheduled reduction of the state's individual income tax rate from 4.35 percent to 4.25 percent on October 1, 2011, while eliminating further scheduled annual reductions in the individual income tax rate. Snyder's proposed changes to the individual income tax would eliminate, reduce, or alter many credits, deductions, and exemptions, including exemptions for public and private pension income.
  • Essentially ending business tax credits, including Michigan Economic Growth Authority credits, Brownfield redevelopment credits, advanced battery credits, and film and digital media production credits, while honoring previously authorized credits. Moving forward, Governor Snyder proposed direct state subsidy of some of these activities through grants from the Michigan Economic Development Corporation and the state appropriations process.

Wayne Roberts, co-leader of Dykema's tax group, recognized the broad implications the contemplated cuts could have on the Firm's clients, pointing out, "A wholesale restructuring of Michigan's business tax and tax credit policy would have an immediate impact on many of our clients, who are just beginning to analyze the effects of the sweeping proposals."

Although Republicans currently control both chambers of the Michigan legislature and the Governor's office, the new budget plan likely will be the subject of significant deliberations and hearings during the next few months. Governor Snyder has set a target of May 31 for completing the budget.

"State government has been spending more than it receives for far too long," Snyder explained. "These are problems that cannot be fixed with accounting gimmicks or a one-time infusion of federal money. These are problems that require the resolve to make tough decisions."

Taxpayers with questions about these or other tax or legislative matters may contact one of Dykema's tax practitioners listed in the sidebar, or your Dykema relationship attorney.

To access Executive Budget Recommendation and other information, use the following links:


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