The Great Tax State
March 23rd, 2005Compounding the problem is that Michigan is the only state to levy a de facto value added tax on its businesses. (That’s another similarity to Old Europe.) Called the Single Business Tax (SBT), this levy is applied to production. This means that any company that loses money or just manages to break even still often pays a hefty sum to the tax man just for the privilege of operating in Michigan. Hence, many don’t.
Change the Michigan tax law, please. For now any other corporations I start are going to be based in Nevada where there is no corporate tax. As an added benefit:
Your name never needs to appear on any public record relating to a corporation over which you might exert pretty much complete control, if only as the “whisper in the ear” of the Board of Directors.
March 24th, 2005 at 11:29 am
Don’t forget Delaware. They are widely considered the most business-friendly state.
March 24th, 2005 at 4:32 pm
The comment regarding Old Europe is misplaced, if it implies that’s the way things work in Europe. Tax laws in various western-european countries are quite diverse (even though EU is trying to ‘harmonize’ them)… but usually companies are taxed on profits (plus, indirectly on sales just like in US, but instead of nasty sales tax [tax-on-tax, that’s a great idea!] it’s VAT (tax only value addition part); not for their mere existence.
As to states that have no corporate taxes: yeah, must be nice for corporations. I just wouldn’t want to live, as then _I_ have to pay for free-riding corporations. ;-p
March 24th, 2005 at 5:15 pm
Menomuna: I don’t think you understand that I’m taxed twice because of the way corporations are set up. I run my consulting through my personal company. The way michigan tax law works I have to pay a tax on my revenue not profit. I paid more money in Michigan corporate tax last year than I had in profit. Taxing profits is fine. Taxing revenue is not. Its the equivalent of hiking the Michigan sales tax a couple percent. And then on top of that I have to pay more taxes for my personal income. Removing the revenue tax isn’t not creating free riding corporations. That assertion is just ridiculous.
March 29th, 2005 at 10:57 am
Dan:
There ought to be a better way to set your company up to avoid that. Are you an LLC? You should be allowed to select S-Corp status as a flow-through entity and have all profits hit your 1040. It might save you some money. You really should audit that class.