Michigan's Governor, Jennifer Granholm, proposed yesterday that Michigan's sales tax be extended to cover consumer services, including self-storage. Granholm hopes to see the sales tax reduced from six percent to 5.5 percent. The change would raise another $550 million in revenue for the state of Michigan. Under Granholm's plan, the money would be used to help pay for public education, making it possible for Michigan schools to maintain their current level of spending. Michigan's Senate Fiscal Agency, which is a nonpartisan organization, previously announced that Michigan's school aid budget will have a $423 million deficit if more money is not raised. Michigan's general fund, likewise, will have a $1.2 billion deficit. Over the last two years, Michigan's general fund has dropped by $2 billion.
This is not the first time Michigan has considered extending its sales tax. A similar attempt was made two years ago, but was defeated as a result of lobbying and advocacy by the national Self Storage Association and the Self Storage Association of Michigan (SSAM).
In states where the sales tax has been extended to cover services, it is not usually used to cover health care, social assistance, education, new construction, real estate and insurance commissions, or services that are a direct part of business operations. While most real estate is not usually considered to be subject to the expanded sales tax, self-storage often is included. Several state self-storage organizations are currently battling legislatures to try to prevent an expanded sales tax from being applied to self-storage, where the expense of the tax might have to be applied to the tenant's rental fee.
Granholm, in addition, wants to halve the 22 percent surcharge on the Michigan Business Tax by next year, getting rid of it entirely by 2012. Her plan also calls for the state to reduce its gross receipts tax rate, which would save businesses about $2.6 billion during the next four years. Granholm also urged school districts to cut staff, offering incentives to 7,000 state workers and 39,000 teachers if they will retire a little early. As well, she hoped to force teachers and state employees to pay three percent toward their retirement pensions, and 20 percent of their health care premiums. This change, she argued, would save Michigan around $450 million and would stabilize the state's pension system. "Those cuts include some tough but necessary changes," Granholm argued before a joint session of Michigan's House and Senate Appropriations Committees. "These are some tough votes that we're asking you to make."