The Everyday Economist

The state of Michigan voted to repeal the service tax that was slated to go into effect today. However, in its place, they have created a 21.9 percent surcharge for businesses.

“This agreement protects health care, public safety and education while replacing revenue from the service tax,” said [Gov.] Jennifer Granholm

This type of rhetoric is what has bothered me most about this debate. Education (schools that, by the way, are failing even by the government’s arbitrary standards), public safety, and health care are not the only three expenditures of the state government. However, when it comes time to balance the budget, these seem to be the only issues discussed.

Facing a $2 billion budget deficit, the state of Michigan decided to pay for it with a new 6% tax on services — not all services, only those with weak lobbying efforts. Karen DeCoster explains:

Already, there is tremendous confusion as to what services will or will not be taxed. It’s funny to note how lobbying efforts have influenced what services are excluded under this new law.

* Real estate will not be taxed thanks to the massive real estate lobby in Michigan.
* Travel tourism will be taxed, further eroding Michigan’s once-booming tourism industry.
* Dating and weight-reduction services will be taxed
* Skiing is taxed, golf is not. Michigan is one of the country’s greatest golf havens. Likely, considering the demographics and available resources, the legislators all golf at Michigan’s premier golf courses, but they go out-of-state to ski.

Other services that will be taxed are balloon-o-grams; fortune telling, palm reading, and astrology; house-sitting; personal fitness training; shoe shines; singing telegrams; baby shoe bronzing; and tattoos. The list goes on forever. “Consulting” services - which will be almost impossible to define - are expected to produce about 70% of the revenues booty.