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State's decision to extend sales tax angers business owners
by Chris Gautz | Jackson Citizen Patriot October 04, 2007
Al Cavasin is not certain why politicians in Lansing decided at the eleventh hour to tax his business to help solve the state budget crisis, but the fallout is clear.
"It's going to kill us. There will be jobs lost and revenue lost,'' he said. "I'm sure we're going to lose business.''
Cavasin, owner of Great Northern Sentry Co., 104 Francis St., provides security, consulting and investigative services, all of which will be subject to a 6 percent sales tax starting Dec. 1.
In last-minute budget negotiations earlier this week, legislators voted to extend the state's sales tax to a select group of about 60 services deemed nonessential for most consumers.
But Cavasin and many other area business owners are angered that their lines of work will face the tax when fees for golfing, marinas and country-club memberships will not. Groups with strong lobby presence — attorneys, cable and satellite television, and sports and entertainment tickets — were able to elude the tax.
Cavasin said the service sector is one of the few still thriving these days.
"Now they've made certain we can't survive, either,'' he said.
Adding to that, Cavasin's industry operates on thin margins and often works on long-term contracts, meaning businesses cannot raise prices and will have to eat the increased cost.
Cavasin is president of the National Council of Investigation and Security Services and serves on the boards of directors of the Michigan Council of Private Investigators and Michigan Contract Security Association.
"I'm definitely going to be twisting some ears and arms in Lansing,'' he said.
Curtis Dubay, economist for The Tax Foundation, a nonprofit, nonpartisan research organization based in Washington, said Michigan erred in two ways.
The state should have included every user-end service business, and the rate should have been lowered, he said.
"It wasn't based on sound tax policy,'' he said. "It was based on gaining as much revenue as possible.''
The state should not have handpicked the businesses that will be taxed, excluding those with strong lobbying arms, such as lawyers, the insurance industry, golfing, entertainment tickets and other true "luxury'' items, he said.
"They went after the ones that had the least amount of political clout,'' Dubay said. "Last time I checked, going to the country club was nonessential.''
Jeff Kirkpatrick, president of Lodise Bail Bonds, 401 S. Jackson St., said taxing people in jail is illogical.
"I don't know that the people in jail are overflowing with money,'' he said.
He takes exception to bail bonds being considered a "luxury'' item.
"I don't understand their logic. There wasn't any logic,'' he said. "I'm not even sure there was any method to the madness.''
And while some businesses can raise prices when they must pay a new tax, Kirkpatrick said he cannot.
By state statute, bail-bond agencies can't charge more than 10 percent of the bond itself, so they are unable to increase their prices to absorb the new tax, he said.
"It becomes a 6 percent reduction to all of those small businesses,'' he said.
He also said this was the only line of insurance that was taxed.
"I wish the Legislature prior to taking this list of items would have looked to those industries for input, but obviously they didn't,'' he said.
Kirkpatrick said he will talk to local legislators as well as those in leadership positions to try to eliminate bail-bond agencies from the list.
Steve Wells, owner of Quality Carpet Cleaning in Jackson, said business has been slower this year compared to years past. He fears having to raise his prices because of the sales tax will drive even more business away.
As it is, people don't have their carpets cleaned as often as they should, if at all, he said. He said if he does raise his prices, he hopes customers understand the reason.
John Schoun, president and owner of A to Z Cleaning & Supply Inc., 581 Woodworth Road, said he is reluctant to raise his prices because he doesn't think people in Jackson can afford it.
"It's terrible,'' Schoun said. "I'll have to bite the bullet. We have to do what the state says, but no one is going to be happy with it.''
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