Wednesday, April 25, 2007

The real tax grab in Michigan

It seems that everyone talks about how the SBT is a "job killer" in Michigan. Granted, the single business tax is a onerous one that is responsible for its share of jobs leaving the state, but a lesser known tax is probably taking a bigger toll on Michigan businesses. That would be unemployment taxes, otherwise known in the business as SUTA.

The state of Michigan has been aggressively, and often over zealously targeting businesses for "SUTA dumping". That is, by definition, the transfer of employees from one entity with a high experience rating for SUTA taxes to one with a lower rate. The Michigan Treasury has been targeting businesses, rightly and wrongly, with huge assessments under this premise, because they hope to get quintuple penalties if they can make the charges stick.

The state has been targeting professional employer organizations (PEOs) with huge (sometimes multi million dollar) assessments, then try to bully the taxpayer into paying the amount. I know of a case where the treasury had a agent back date reports to say that SUTA dumping existed when it did not. This agent, in a tax tribunal hearing, took the fifth when asked whether or not he back dated a report stating he thought there was SUTA dumping. This agent, when I worked in Metro Detroit, did the SUTA audit on the client, and after several weeks at my former office going through all the records, originally reported that there was no wrong doing by the taxpayer. A few months later, the client received a massive assessment, and was accused by the Michigan Treasury of SUTA dumping. A good friend and former colleague of mine represented the client in tax tribunal when the fifth was taken.

This is not the first time the state treasury has bended the rules in order to revert to the Roman tax collection method. This harassment of Michigan employers, along with their back door methods to raise taxes by jacking up payroll taxes for employers, is not a good way to keep them in the state.

Way to go Governor Granholm! Back door payroll tax increases and egregious behavior by your auditors is not the way to bring jobs into the state.

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