Monday, March 11, 2019

business proposal

business proposal


Whitmer fuel, business tax proposals already being carved up - Crain's Detroit Business

Posted: 09 Mar 2019 06:11 AM PST


The shock and awe of Gov. Gretchen Whitmer's proposal to nearly triple Michigan's fuel taxes and levy a higher tax rate on 150,000 largely small businesses has already worn off.

The budget blueprint Whitmer presented to a Republican-controlled Legislature last week is likely to look very different by the time lawmakers send a fiscal year 2020 spending plan to the new Democratic governor's desk.

Legislative leaders last week quickly shot down Whitmer's long-shot proposal to levy a new 1.75 percent tax on pass-through business profits of S-corporations, limited liability corporations and partnerships. Those business owners currently pay the 4.25 percent individual income tax instead of the 6 percent Corporate Income Tax.

Whitmer proposed taxing businesses equally at 6 percent as a means of generating $280 million of the $355 million needed to reinstate an income tax exemption on public sector pensions.

"Those kinds of actions would be doubling down on stupid," said Senate Majority Mike Shirkey, a Clarklake Republican and owner of Orbitform Group LLC, a Jackson tool-and-die maker that would be subject to higher taxes under Whitmer's proposal.

Business groups and a conservative economist who led the effort to get rid of the Single Business Tax over a decade ago also roundly criticized Whitmer's business tax plan as a return to double-taxation entanglement of the SBT and its successor, the Michigan Business Tax.

"The argument is we need to give government pensioners a tax break, and we're going to pay for it with a surtax on private employers," said Patrick Anderson, CEO of the Anderson Economic Group in East Lansing and author of the SBT repeal in 2007. "This is double taxation — there's no two ways around it. It's double-taxation at a lower rate."

State Treasurer Rachael Eubanks said a new 1.75 percent tax on the profits of s-corps, LLCs and partnerships would ensure those companies are "taxed at a parity rate" with c-corporations subject to the 6 percent CIT.

"To be clear, even with these changes, these entities are still paying far less tax than they paid under the MBT," Eubanks said in an interview.

In an interview with Crain's, Whitmer signaled her willingness to jettison the business tax proposal if she can get a deal on tax revenue for roads — the cornerstone of her political mandate from voters last fall.

"I did have a conversation with some people in the business community and they said, 'Well, we don't like this one piece.' And I said, 'Fine, work against that one piece, but help me get the rest of this budget done,'" Whitmer told Crain's.

House Speaker Lee Chatfield, an Emmet County Republican, called Whitmer's proposed 45-cent fuel tax hike a "nonstarter," while Shirkey said it's simply too high of a burden for motorists and businesses to shoulder.

"The citizens of Michigan cannot absorb — especially the folks that actually work for a living — cannot absorb a 45-cent increase in the gas tax," Shirkey told reporters. "They just can't do it."

Mark Griffin, president of Michigan Petroleum Association and Michigan Association of Convenience Stores, said the owner of an average gas station that sells 2,500 gallons of fuel per day would have to prepay an additional $1,125 in tax each day, creating cash-flow problems for their business.

"When you're making two cents-a-gallon (profit) typically at best, you can't eat $1,100 a day," Griffin said. "If you raise your gas prices, now you're eating yourself on your in-store sales. It also means we'll never see $2-a-gallon gasoline ever again."

Griffin said his member businesses "get it" that Michigan's roads are crumbling and in need of additional investment.

"But they just don't want to be put out of business," he said.

The Tax Foundation said Whitmer's proposal would push Michigan's taxes at the pump above 89 cents per gallon when counting the sales tax. That would make Michigan's fuel taxes the highest in the nation and 30 cents above the next highest state (Pennsylvania), the Tax Foundation said.

At 89.13 cents per gallon, Michigan's tax would be twice the tax levied in Indiana (42.90 cents) and more than triple Ohio's 28 cents per gallon (though Ohio's Republican governor is pushing for an 18-cent increase).

"If you've got a gas station along the Michigan border, you're going to be out of business," said Bob Barrick, owner of Barrick Enterprises Inc., a Royal Oak-based jobber that delivers fuel to 240 gas stations in Southeast Michigan.

Whitmer said the pothole "crisis" plaguing motorists "requires a bold, real solution that actually fixes the problem."

Though Whitmer's tax hikes — as proposed — are seen in Lansing as dead on arrival, Shirkey and other Republican legislators have left open the door for some form of tax increase to fund roads.

"I probably will look at some type of revenue as we move forward," Senate Appropriations Chairman Jim Stamas said during a taping of WKAR-TV's "Off The Record." "But what that revenue is and how much it is, I don't have that."

After years of debating road funding, Shirkey said there's "consensus that we can rally around" that the state needs to be spending $2.5 billion more annually on roads.

Both he and Stamas said they count the Legislature's 2015 road-funding plan that's supposed to generate $1.2 billion more annually for roads by 2021 to the $2.5 billion goal.

Whitmer's $2.5 billion fuel tax hike would generate a net road funding increase of $1.9 billion by the 2021 fiscal year because she removes an earmark of $600 million of income tax that was part of the 2015 funding plan, according to nonpartisan House Fiscal Agency.

The governor's budget plan shifts the $600 million in income tax revenue back to the general fund, freeing up money for new investments in universities, community colleges, K-12 schools and a new skills-training program for adults to complete degrees and certificates.

"Asking for $2.5 billion more is one thing. But $600 million of that is to support spending in the general fund," said former Lt. Gov. Brian Calley, now the president of the Small Business Association of Michigan. "Raising the road tax to supplement current general fund spending may be problematic."

Lawmakers are starting to study other ways to generate more money for state highways, local roadways and bridges.

Chatfield wants to remove the 6 percent sales tax on gasoline and diesel fuel that is legally earmarked for schools and cities.

The fact that sales taxes levied on fuel don't go to roads has long been a complicating factor in past legislative efforts to raise new revenue for roads.

In 2014, the Legislature sent voters a proposal to raise the sales and use taxes to 7 percent in exchange for removing the sales tax on fuel and replacing that with a higher tax on gasoline and diesel. Voters rejected that proposal — which Whitmer was a part of crafting as the Senate's Democratic leader — in a May 2015 special election by a margin of 60 percentage points.

Removing the sales tax on fuel or and converting that amount to a higher fuel tax would eliminate an estimated $830 million in tax revenue that supports K-12 schools and municipalities.

"I've said it from the very beginning: House Republicans have no intention of turning back the clock on K-12 education funding," Chatfield told reporters Thursday.

But Chatfield offered no plan for holding schools and cities harmless, suggesting House Republicans were still working on a plan.

Whitmer's plan calls for the tax on gasoline and diesel to increased in three, 15-cent chunks over a year.

The governor acknowledged the massive fuel tax increase could have a ripple effect in the economy in the cost of consumer goods and services.

"We are paying a tax right now and it's the worst kind of tax because it's not actually fixing the roads — we're fixing our vehicles, businesses are fixing their fleets of cars, farmers are not getting their produce to market on time because of problems along the roadway," Whitmer told Crain's. "We're all paying for infrastructure that is crumbling beneath us."

Stamas, R-Midland, diplomatically called Whitmer's budget plan "courageous."

"I can't say I agree with it," Stamas said. "But at the same point, to come out with a 45-cent proposal on gas and the amount of almost $2 billion more in spending, right off the top, that takes courage."

The Associated Press contributed to this report.

Correction: Gov. Gretchen Whitmer's proposed business tax increase would create a new 1.75 percent tax on pass-through income from s-corporations, limited liability corporations and partnerships. An earlier version of this article incorrectly said the governor wants to add s-corps, LLCs and partnerships to the Corporate Income Tax code.

Don’t let extradition row dent faith in judicial system, Paul Chan says - South China Morning Post

Posted: 08 Mar 2019 10:23 PM PST

[unable to retrieve full-text content]Don't let extradition row dent faith in judicial system, Paul Chan says  South China Morning Post

Financial secretary allays industry fears and points out that there will be safeguards to arrangement with mainland China. Meanwhile, commerce chief Edward ...

Elizabeth Warren's proposal to break up big tech shouldn't shake Amazon shareholders — yet - Business Insider

Posted: 10 Mar 2019 06:03 AM PDT

Jeff BezosREUTERS/Joshua Roberts

  • Sen. Elizabeth Warren, the Massachusetts Democrat and presidential candidate, proposed on Friday a plan to break up big tech companies like Amazon, Facebook, and Alphabet's Google.
  • The plan doesn't appear to immediately threaten Amazon, said Eric Sheridan, an analyst at UBS, who spoke with Markets Insider on Friday.
  • Still, regulation is the top concern he discusses with investors, as far as challenges facing large-cap tech names. 
  • Watch Amazon trade in real-time.

Sen. Elizabeth Warren, the Massachusetts Democrat and 2020 presidential contender, announced on Friday a plan to break up big tech companies she argues have grown too big.

"Today's big tech companies have too much power  —  too much power over our economy, our society, and our democracy," Warren wrote before the stock market opened. "They've bulldozed competition, used our private information for profit, and tilted the playing field against everyone else. And in the process, they have hurt small businesses and stifled innovation."

Warren's plan named Amazon, Facebook, and Alphabet's Google, and would force the rollback of some of their acquisitions, like Facebook's WhatsApp and Instagram, Amazon's Whole Foods, and Google's Waze.

Amazon shares — which in recent weeks have been engulfed in a flurry of announcements and political controversy — opened lower Friday morning, but finished little changed as the broader stock market recouped the majority of its early losses. 

At the moment, Warren's plan still has a lot of unknowns — like which federal agency would see to the proposal, said Eric Sheridan, an analyst at UBS who has a "buy" investment rating on the stock.

And while regulation is the "number one topic" Sheridan discusses with investors as far as mega-cap tech headwinds go, he thinks Amazon is not under threat, at least in the near-term.

Read more: Elizabeth Warren says she wants to break up big tech companies, including Amazon, Google, and Facebook

"I would expect — and I'll try to make this as least a political statement as possible — I would expect, given the stance the Democratic party might try to take into the election of being more progressive and left-leaning, that I'm sure there will be plenty of press releases and shots taken at big tech in the next year, year and a half," Sheridan told Markets Insider on Friday. "It's a fairly easy mechanism to score political points. Whether it ever turns into something that's reality, we'll continue to factor."

He added: "I think we're a long way from that going from noise, and a political issue, to reality."

In a report Sheridan wrote in November 2017, he and his colleagues came to the conclusion around the state of large-cap Internet regulation that investors were heading into a "multi-year wave that would act as a headwind for the group."

The proposal may be subject to legal obstacles, Sheridan said, as the deals that Warren is taking aim at have already been approved by US regulators. There's not a lot of precedent for going back and revisiting prior approved mergers, and then breaking them apart, "but we'll have to monitor it," he said. 

"If you look at why I think some of the companies have underperformed for certain periods of time in the last year and a half — we have a neutral rating on Facebook — we think some of these issues do factor into stock prices, and multiple compression, and things like that," Sheridan said, referring to data and privacy issues. 

"There's no doubt that when GDPR was implemented, or the Cambridge Analytica scandal, that those had a headwind impact on the stocks."

Read more related coverage from Markets Insider and Business Insider:

Amazon took over the $176 billion market for cloud computing. Now it's using the same playbook in logistics.

Elizabeth Warren's plan to break up tech giants would force Amazon to roll back its acquisition of Whole Foods

We asked the biggest Netflix bull and bear on Wall Street the same 5 questions. Here's what they said about cash burn, competition, and what the other side is getting wrong.

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