End of the World Is Near!

If you listen to the media mouthpieces for Michigan business, life as we know it is about to come to an end. The sky if falling. The apocalypse is nigh. Martians are about to invade, Oh, the humanity!

The source of all this hand-wringing?

Starting Saturday (December 1, 2007), barring a major development, certain Michigan businesses will have to start charging a service tax.

And it is just so complicated they just don't think they can figure out how to do it.

The Detroit Free Press' story on the service tax by Dawson Bell included this claim:

"The owners of landscaping, warehousing and consulting firms said the new tax is a nightmare of complexity and confusion that would inflict huge compliance costs in addition to the tax itself. Sarah Hubbard of the Detroit Regional Chamber said Michigan business would spend nearly a billion dollars interpreting and adapting to the new tax, and many still won't know whether they are following the law."

Oh, come on. A billion dollars because you have to collect the tax on manicures but not hair cuts? This is complicated?

The Free Press also ran a list of services that are taxed. Seems pretty straight-forward to me -- hot air balloon rides, landscaping services, limo rides, that kind of stuff. Don't businesses know whether they're offering hot air balloon rides? Are there business owners out there who can't remember whether they expanded their nail salon into a limo service recently?

My reaction to the service tax has always been -- it's about time. I've lived in this state nearly 19 years and one of the strangest things about moving here was the lack of a service tax to go along with the sales tax.

I grew up with a service tax in Iowa. I guess the business people in Iowa must be a lot smarter than the people in Michigan because they seem to be able to figure out which services are covered by the tax and which are not. Pet grooming wasn't covered, but people grooming was. Legal services weren't covered, but lawn services were. They managed to figure all that out way back in the 1960s without the aid of electronic calculators or programmable cash registers.

The political lore about the passage of the service tax there is that Gov. Harold Hughes sat down with the Yellow Pages and picked out the services that he thought should be taxed. There wasn't a category for pet grooming in those days, so it didn't get covered until later.

What I like about the service tax is that it tends to fall on higher income people more so than the sales tax. Most poor people don't hire landscape services or get pedicures or take hot air balloon rides. And well-off people are not going to start installing their own landscaping to save 6 percent, believe me.

And the competitive argument I just don't get. If all businesses in the same category have to collect the tax, aren't they all on the same footing?

Change is always difficult, and independent business owners don't like to be told what to do. But the reaction and consternation seem to be all out of proportion to the inconvenience.

It's possible, of course, that Michigan business people really aren't smart enough to figure out how to collect 6 percent on the services they provide.

If that's the case, then I understand why Iowa leads off the presidential nominating process and not Michigan.