Value Added Taxation in the United States: The Michigan Single Business Tax
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Authors
Smith, Bradley A.
Issue Date
1980
Type
Thesis
Language
en_US
Keywords
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Abstract
Michigan's unique business patterns and powerful
labor unions have long made the state the site of high-pitched,
emotional political battles concerning the
treatment of the state's business community, but rarely
has a measure generated as much controversy as Public
Act 228 of 1975; the Single Business Tax Act.
Signed into law on August 27, 1975, and put into
effect on January 1, 1976, the tax was immediately hit
with thundering broadsides of criticism. It is perhaps surprising that this tax has generated so much controversy, as it was expected to greatly simplify
Michigan's business tax structure. Why, then, the controversy? The Single Business Tax
itself is a consumption based value added tax. It is defined
in the law as a tax upon, "the privilege of doing
business, and not upon income." In the United States,
where income has traditionally defined ability to pay and
ability to pay has been a key factor in the tax system
during the 20th century, this marks a radical departure
from the accepted definition of tax equity. It is, however,
a very common method of taxation in most of the
rest of the industrialized, non-communist world. Proponents
of value added taxation argue that the tax is
proportional to the economic size of a business, and is
not affected by the business' chosen means of organization,
finance, or production. Thus all businesses are taxed equally, and equity exists on a basis of 'benefits received'
rather than 'ability to pay'.
In the United States today the public outcry for
tax reform has lead to increased interest in this form
of taxation. The value added tax has been viewed by many
as the answer to recurring fiscal problems on both the
state and federal levels. As Michigan's Single Business
Tax provides us with the only functioning example of a
value added tax in the U.S., it is worth studying from
both an economic and a political point of view.
Unfortunately, there is little data on which to
judge the effects of the SBT. The kind of data that would
be needed for a truly accurate portrayal of the tax is
generally not public information. Still, it is worthwhile
to review the stormy history of this tax and to make
what judgments we can from the information available.
Description
iv, 67 p.
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License
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