Local Business Owners Frustrated Over Michigan Business Tax

KALAMAZOO (Newschannel 3) - While taxpayers are getting some of their money back through economic stimulus checks, it's the other way around for Michigan businesses.

In some cases, those businesses are getting state tax bills that are 500 percent higher than last year, and now it's time to pay up.

This is the first year for the new Michigan Business Tax, replacing the old SBT, or Single Business Tax. The MBT is expected to raise billions more for the state, which is a key part of the effort to bridge a massive budget gap.

But local businesses say they're shouldering a heavy burden, and it's not fair to make business owners responsible for the budget shortfall, which could eventually trickle down to the consumer, too.

Clare Rothi is the President of PFS Premium Finance Corp. in downtown Kalamazoo. He started the business in his basement in 1989, and it now has six people and is family-owned and run. But it won't be expanding, hiring or investing in the near future, since it's tax bill went from $10,000 to $55,000 per year under the new MBT.

"We now are no longer a small business, we're being taxed as though we have hundreds of employees," said Rothi.

Shashin Kothwala, the owner of Crystal Car Wash in Oshtemo, is running into the same problems as Rothi.

"We paid $5,000 under SBT, now we're paying $25,000," said Kothwala.

Kothwala says that because of the MBT, he has been forced to let go of six of his 20 workers.

"For the first time in the history of ownership of the car wash, we've laid off people, we've had to bring in lower cost wages, we've cut benefits," he said.

Now lawmakers are hoping small business owners can advise them on a fix for the MBT, and head off the likely scenario that those tax costs will be passed onto consumers.

"As we begin to recognize the magnitude of the problem that's been created in Lansing, I'm optimistic there will be a bipartisan effort to find a solution," said State Representative Jack Hoogendyk (R), of Texas Township.

Business owners say that if the taxation doesn't let up, it will kill business, or just force businesses to move out of Michigan.

The state of Indiana is even running a billboard campaign near the state border, in an attempt to attract businesses hit hard by the MBT and Michigan's tax climate.