Canadians Threaten Tax Reprisal
Michigan Gov. John Engler announced June 1 that the state would phase out its 2.3% single business tax — a charge on businesses within the state — over the next 23 years. But in the meantime, he said, the state would also collect the levy from foreign businesses that operate in the state, most of which are Canadian.
When they received letters informing them of the new tax, Canadian businesses protested emphatically, prompting the state to look for a compromise. Michigan legislators amended Engler’s proposal so that foreign companies would not be taxed on their total revenue but only on income earned in Michigan.
However, Maureen Menaulty Saxton, a spokeswoman for the state’s Department of Treasury, said trucking is not included in the compromise and the state was still deciding if and how the industry should be taxed.
“What we’re saying is that foreign companies were doing as much business in the state as many Michigan companies or other state companies that did have to pay the tax, so the tax should be applied to them too,” said Saxton.
“Just because they don’t have a permanent presence in Michigan doesn’t mean they should be totally tax exempt,” she said. “That’s blatantly unfair.”
But Canadian truckers are left to wonder how they’ll be affected by the tax and any changes it may undergo.
“I think what happened is that the interests of the manufacturing sector — particularly the automotive sector — were paramount in the minds of both the Canadian and Michigan governments, and Gov. Engler imposed a compromise on the situation that does nothing to improve the situation for Canadian truckers but appears to have significant benefits for manufacturers,” said David Bradley, the chief executive officer of the Canadian trucking group.
He said New Jersey, New York, Pennsylvania, Ohio and Massachusetts have also begun trying to collect similar taxes from Canadian truckers.
“We believe our government needs to be putting more pressure on states that are trying to impose these kinds of taxes, which are really protectionist in nature and impair international trade,” Bradley said. “Our natural reaction is that if we’re not able to get the cooperation of states, we’ll have to ask the Canadian government to find a similar way of imposing taxation on U.S. carriers that levels the playing field.
“I don’t think anybody wins that way, but we cannot abide by a situation where we’re going to die the death of a thousand knives at the hands of local governments,” he said.
Bradley said if Michigan does impose the tax on Canadian carriers it could cost the industry up to $50 million.
