1. ASPA/MICAP Conference September 30, 2011 R. Kleine 9/20111

2.  Business Activities Tax- 1953-1967  Corporate Income Tax- 1967-1975  Single Business Tax- 1976-2007  Michigan Business Tax- 2008-2010  Corporate Income Tax- 2012-? R. Kleine 9/20112

3.  Stable- largest decline was 14% (1981)  Treats labor and capital equally  Does not discriminate based on type of organization  Provides good measure of benefits received by business from public services  Low rate minimizes interference with business decisions R. Kleine 9/20113

4.  Complicated  Unique in U.S.  Tax on compensation not understood  Subtractive method of calculation would have likely reduced criticism R. Kleine 9/20114

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6.  Favorable treatment for small business (gross receipts $20 million or less)-1.8% of business income  Stable (profits 30%, gross receipts 70%) R. Kleine 9/20116

7.  Complicated- too many credits  Higher rates than SBT- 6% on business income compared with 1.9% for SBT  Surcharge very unpopular R. Kleine 9/20117

8.  Widely used  Business only pays when profitable R. Kleine 9/20118

9.  Unstable- down 34% in 73-75 period  Favors labor over capital  Discriminates based on form of organization  Penalizes efficiency  Subject to manipulation- voluntary tax  Rate more easily increased than SBT or MBT  95,000 fewer businesses pay than under SBT and MBT-41,000 now pay R. Kleine 9/20119

10. 6% Corporate income tax$778 million 3.5% Business income tax$780 million 2.5% BI tax plus 0.1% gross rec. tax $830 million 6% Business income tax$1,.4 billion 4% BI tax plus 0.1% gross receipts tax $1.2 billion Eliminate or phase out gross receipts tax leaving 6% BI tax R. Kleine 9/201110

11.  Business tax cuts offset by tax increases on individuals and families and spending cuts  Most of tax relief goes to non-mobile retail and service businesses- only 18% to manufacturers  Business taxes much lower than in 1990s  Business taxes are only 5% of state GDP and tax cut amounts to only 0.5% of GDP 11R. Kleine 9/2011

12.  Services- $575 million  Prof.& Tech services- $181 million  Manufacturing- $279 million  Retail Trade- $153 million  Wholesale trade- $139 million  Real Estate- $110 Million  Construction- $90 million  Finance & Ins.- $75 million  Other- $112 million 12R. Kleine 9/2011

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14. 14 Source: Bureau of Economic Analysis Corporate Profits Up Sharply in Last Three Years 2011 Q2: $1,934

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16. Robert J. Kleine Great Lakes Economic Consulting www.greatlakeseconomics.com 9/2011 R. Kleine 9/201116