GOP leader proposes $4.7B Michigan service tax to pay for property tax cuts

Michigan House Speaker Matt Hall, R-Richland Township, pitches 6% sales tax on luxury services, potentially generating $4.73B in revenue
That money would be used to pay for a cumulative $5B tax overhaul and utility rate rollback plan Hall proposed last week
It’s the first major Michigan service tax proposal since 2010 under then-Gov. Jennifer Granholm

LANSING — Michigan House Speaker Matt Hall is pitching a 6% sales tax on luxury services as a way to pay for his recently announced plan to cut property taxes and lower energy bills.

Among the services Hall, R-Richland Township, is proposing to tax: Limousines, country club memberships, tourist services, skiing, golf, artificial intelligence services, performing arts, private jets, environmental consulting, newspaper publishing, marinas and political ads.

Those proposed service taxes, as first reported by WLNS-TV in Lansing, could generate roughly $4.73 billion in state revenue, nearly offsetting $5 billion tax overhaul he proposed earlier this month, including elimination of the State Education Tax, real estate transfer tax and remaining personal property taxes.

All told, it would amount to a roughly $270 million tax cut and be “the biggest tax reform in Michigan’s history,” Hall told the television station.

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Services are currently exempt from Michigan’s 6% sales tax.

Hall’s proposal would not tax all services, however. Services at nail salons and barbers, landscaping, legal services, health care services, child care, veterinary care, dry cleaning and steaming services — as well as car repairs — would all be exempt from the plan, his office confirmed.

Speaking with WLNS on Tuesday, Hall contended working families could avoid most of the new taxes. Taxes on tourism-related services, he added, would largely be paid by people from out-of-state.

It’s the first major Michigan service tax proposal since former Gov. Jennifer Granholm, who twice proposed broader service taxes. She signed off on a 2007 tax plan that was repealed before it took effect and again pitched extending the state sales tax to services in 2010 as part of a larger plan to address a budget deficit and cut the Michigan Business Tax.

Details of Hall’s plan come less than a week after he publicly pitched a $4 billion tax overhaul plan that would also mandate $1 billion in utility rate rollbacks – promising to hold harmless schools and local governments that rely on property taxes but not immediately proposing replacement revenue.

As part of that larger effort, Hall said he would like to see the elimination of the 6-mill State Education Tax – which Michiganders pay on their summer property taxes – personal property taxes, real estate transfer tax and what he calls a “pop-up tax” incurred upon selling a home.

Michigan began phasing out personal property taxes for many large businesses under a 2014 law. But last week Hall said he’d “like to go further” and scrap the tax altogether, arguing it “punishes growth and investment” throughout Michigan.

Utilities could save money as a result, he said, telling reporters he would not eliminate their personal property taxes “without also mandating at least a $1 billion rollback in our energy bills.”

“You can’t take away the cost, push them toward investment and then not see a major reduction in our utility bills,” Hall said during a Feb. 19 press conference. “I think this will lead to major savings for our residents of Michigan. We can get a more reliable grid and a more affordable energy bill.”