Sunday, December 30, 2007

Open letter to Michigan's Governor

Dear Governor Granholm,

Please read Taxation and the right of exit. Don't miss the comments.

It describes a "social experiment" in Denmark, and how language differences with the rest of Europe make it somewhat more difficult for "well-educated, cosmopolitan Danes" to emigrate in response to punitive taxation. A problem well-educated Michigan residents do not face vis-à-vis Indiana, for example.

That part of federalism still operates, despite the best efforts of your philosophical brethren in Washington, Democrats in the State legislature and RINOs like Senator Ron Jelinek, who proposed extending a 5% sales tax to all services on WJIM radio last January.

In response to the interviewer's comment that such a services tax would hurt businesses in border communities, Jelinek noted (I paraphrase) "that most Michiganders don't live close enough to a border to be able to avoid such a tax."

Hold your citizens in contempt long enough, and they will solve that border problem.

Denmark has tried to address its problem by taxing emigration, but your new MBT goes them one better, by continuing to tax investors if they dare set foot back in Michigan for one day a year.
A taxpayer, other than an insurance company, has nexus with Michigan and is subject to the tax imposed under the MBT if (a) the taxpayer has a physical presence in this state for more than one day in a tax year, or (b) the taxpayer actively solicits sales in this state and has unapportioned gross receipts of $350,000 or more sourced to this state. MCL 208.1200(1).
"Gross receipts," unfortunately, include interest and dividends from investment, whether or not you have a "business" in any commonly understood sense. How many potential investors, who are already being encouraged to move out of Michigan, will continue to invest here - given the fact that they would then be liable to MBT taxation if they come back to see their grandchildren for one day a year?

Sincerely,
Duane Hershberger

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