Calley touts replacement of business tax he had hand in creating

What is being left out, however, is that in 2007 he helped create the very tax that Gov. Rick Snyder and Republican lawmakers scrapped.

“I got rid of the Michigan Business Tax,” Calley says in a video sponsored by an independent political action committee that is backing him ahead of a likely candidacy. “It just didn’t work. We replaced it with one that was fair for all businesses, large and small. Your government got that right.”

The tax issue is one that could both aid and hurt Calley in the August 2018 GOP primary.

As lieutenant governor, he cast the tie-breaking vote to replace the old tax with a simpler corporate tax that is levied on fewer businesses — a move that has been hailed by a business community whose political backing is important for Republican candidates. Democrats and some Republicans, though, have criticized how the plan also eliminated or reduced credits and exemptions for retirees and other taxpayers — which was effectively a tax hike on individuals and something that is not mentioned in the ad.

Calley’s past support for the 2007 business tax, which had bipartisan backing and replaced the Single Business Tax, surely will be highlighted by other GOP contenders and their allies. Calley — then a freshman House member — served on a conference committee that crafted a final version of the legislation, and he was the lone Republican present when former Democratic Gov. Jennifer Granholm signed it.

“When Democrats controlled two-thirds of state government, I was afraid that if I didn’t get in there and fight for small business that they might get left out or really hurt,” Calley told reporters on Thursday.

He said his involvement ensured that 110,000 small businesses that were not paying the Single Business Tax would also be exempt from the Michigan Business Tax and that 62,000 small businesses got a tax cut.

“I knew at the time that I’d get questions like this someday because I didn’t like the overall tax structure of the MBT, but if I’d just walked away, those 110,000 and those 62,000 small businesses that I protected by getting engaged and involved really could have seen the same type of ramifications that the others did,” Calley said. “But once we were in charge, then I wasn’t stuck with a tax structure that somebody else developed. We could just scrap the whole thing and do what we wanted to do in the first place.”

Calley also was among 10 House Republicans to vote later in 2007 to tack on a 22 percent surcharge to the Michigan Business Tax to quickly rescind a reviled sales tax on services.

He said Thursday that the 2011 tax rewrite was necessary because “I felt that people needed jobs more than any other thing.” Until Snyder took office, Michigan exempted all Social Security and public pension benefits from income taxes, as well as up to $45,000 in private pensions, IRAs and annuities for a single return and about $90,000 for a joint return. Those with 401(k)s were taxed on a portion of their distributions.

“Before, senior citizens were all treated differently,” Calley said. “So if you had a government pension, you were totally tax-free. If you had a private-sector pension, you were tax-free up to a certain amount. If you had a 401(k), the employer-sponsored portion was tax-free but the portion that you put in was taxed. And if you couldn’t afford to retire but had to keep on working, you were fully taxed. … So what we did is we said, ‘All of them, no matter where their income comes from, the first $40,000 per household — tax-free.’”