5743: COMMITTEE SUMMARY (3-21-06) - SINGLE BUSINESS TAX: REPEAL

SINGLE BUSINESS TAX: REPEAL H.B. 5743: COMMITTEE SUMMARY

House Bill 5743 (as passed by the House)
Sponsor: Representative Leon Drolet
House Committee: Tax Policy
Senate Committee: Finance

Date Completed: 3-21-06

CONTENT The bill would repeal the Single Business Tax (SBT) Act effective for tax years beginning December 31, 2007.
The bill states that, "It is the legislature's intent that a replacement tax for the single business tax...shall be less burdensome and less costly to employers, more equitable, and more conducive to job creation and investment, and shall not include an increase in the rate or base of any of the following:"

-- The State income tax imposed under the Income Tax Act.
-- The sales tax imposed under the General Sales Tax Act.
-- The use tax imposed under the Use Tax Act.
-- Taxes collected under the General Property Tax Act.
-- Any other tax whose economic incidence is on individuals.

The bill also would repeal Enacting Section 1 of Public Act 531 of 2002 and Enacting Section 3 of Public Act 115 of 1999. The Enacting Section 1 of Public Act 531 of 2002 repeals the SBT Act effective for tax years that begin after December 31, 2009. Enacting Section 3 of Public Act 115 of 1999 repeals the SBT Act on the January 1 of the year in which the rate is reduced to 0%, and states that the SBT Act is not effective for tax years that begin on or after that date.

(Public Act 115 of 1999 amended the SBT Act to provide that beginning January 1, 1999, the tax rate will be reduced by .1% each January 1 if the Comprehensive Annual Financial Report for a State fiscal year (published pursuant to the Management and Budget Act) reports an ending balance of more than $250 million in the Countercyclical Budget and Economic Stabilization Fund for that fiscal year. Under the Act, the SBT rate has been reduced from 2.3% in 1999 to its current rate of 1.9%.)

Legislative Analyst: J.P. Finet

FISCAL IMPACT
This bill would reduce single business tax revenue an estimated $1.1 billion in FY 2007-08 and would eliminate all single business tax revenue in subsequent fiscal years, which would total about $2.0 billion in FY 2008-09. All of this reduction in revenue would affect the General Fund/General Purpose budget.

Fiscal Analyst: Jay Wortley

Analysis was prepared by nonpartisan Senate staff for use by the Senate in its deliberations and does not constitute an official statement of legislative intent. hb5743/0506