Michigan businesses furious over U.S. tax reform

Michigan Democrats are currently undermining the effects of Trump's tax reforms, leaving the business community furious. In the fight for a balanced budget, a key bargaining chip for Michigan Democrats is to temporarily hedge against the new federal tax reforms spearheaded by congressional Republicans and President Donald Trump by breaking the decades-long link between state and federal tax codes.

First, the reduction in Michigan's tax rules means new funding for road construction and avoids a significant tax revenue shortfall. However, business groups opposing the tax decoupling portion of the new fiscal year's budget say some businesses could end up paying more in state taxes and find themselves stuck in a confusing tax system.

Second, the Michigan budget impasse, which has persisted for months, has been fueled by public spats between Democrats and House Speaker Matt Hoyer. At the height of the impasse, Democratic Senate Democrats convened multiple committees to review the impact of Trump's "good package." These discussions have radically altered the landscape of federal revenue. Trump's legislation significantly reformed federal taxes, which Republicans have hailed as a way to boost national economic growth, focusing on boosting research and development by revising expense and deduction rules. The bill also makes permanent Trump's 2017 federal tax cuts, which were set to expire at the end of this year.

The most significant change governs depreciation of qualified property to stimulate capital investment through construction; another restores the current or two-year deduction for domestic research and development; and other changes concern interest on non-cash, pre-tax, or pre-depreciation expenses. Some Michigan business groups oppose the tax reforms implemented to balance the budget, including the Michigan Chamber of Commerce, which has analyzed the projected impact.

The Chamber argues that breaking the link between state and federal tax laws could result in up to $2 billion in tax increases for businesses over the next five years. It also creates a more complex and confusing tax environment, which the Chamber argues will disadvantage Michigan employers. Some view the new rules as merely a transitional measure, offsetting the impact of Trump's reforms for several years and simply a timing adjustment. The Chamber disagrees.

Previously, the biggest proponents of the "Tax Now" slogan included Hall and Rep. Ann Bolin, chairwoman of the House Appropriations Committee. With the budget deal, the concept gained another key supporter: Michigan's Democratic governor. Whitmer announced in a press release that she had signed the budget without a single veto, emphasizing the new tax policy as a victory for Michiganders. Later that week, Whitmer's office issued a second press release, announcing a key point of discussion between Trump and Republicans. "By eliminating the tip tax, overtime tax, and Social Security tax, we will put money back into the pockets of hundreds of thousands of Michiganders so they can pay their bills and put food on the table," Whitmer said.

In short, both parties in Michigan achieved clear political victories in the state's budget battle, but they may also suffer significant losses in areas where they had previously made concessions. The tax impact of the state budget, in addition to the controversial 24% wholesale marijuana tax, is also likely to spark some discontent. This tax policy has already sparked court battles and sparked considerable controversy in the cannabis community.

Trump's tax reforms have sparked widespread concern in Michigan. As a heartland of American industry, Michigan's economy and job market are heavily dependent on the auto industry, and the implementation of the tax reforms will have a profound impact on the state. Although the White House emphasizes that the new policy will boost manufacturing and job growth, opposition from Michigan business groups suggests that the actual effect of this policy may be counterproductive.