New levy taxes 23 services

Businesses worry measure will drive away customers, force them to raise prices.

Oralandar Brand-Williams / The Detroit News

Businesses were wincing at the thought of a 6 percent services tax state, afraid it will drive away customers or force them to hike prices to offset the loss.

From ski resorts to tanning salons, business owners worried about how clients would respond to the hike. Other services targeted under the proposal include landscaping, security system services and carpet cleaning. The tax would raise $600 million from December through September 2008 and $725 million annually thereafter. The state House passed the measure Sunday evening; the Senate passed the sales tax expansion early today.

For John Kassab, the owner of VIP Tanning of Troy on Square Lake Road and Livernois, the tax is a bad idea.

"It's going to hurt us a little bit in the beginning," said Kassab. "People will feel like they haven't had to pay a service tax all their lives and now they're going to have to pay one. It's a way for the state of Michigan to dig into our pockets for more money," said Kassab. "If they could, they would tax the air we breathe."

State Treasurer Robert Kleine said lawmakers took care to skip services that are deemed unavoidable, such as plumbing and car repairs.

"It's discretionary only," he said.

The governor and legislative leaders were observing a news blackout and not talking publicly.

Jack Myers, a 62-year-old retired Oakland County school superintendent, is a weekly customer at VIP Tanning.

He said the tax is bad news for his budget since he is retired and on a limited income.

"I have back problems and the heat (from the tanning bed) helps me," said Myers. "For me it's like putting a tax on medicine."

The tax would also affect Michigan ski resorts by taxing services.

"Any service tax should be across the board on all services and not single out specific areas of the economy," Stephen Kircher, president of Boyne USA Resorts' eastern operations, said in a statement.

Landscaping would also be hit with a tax.

John Baker, owner of Metro Detroit Landscaping in St. Clair Shores, said a service tax will cost him business and money. "It's just a killer. The only people who will benefit is the state," said Baker. "I will have to pay somebody in the office overtime to collect the taxes and process them."

Baker said he worries other landscaping companies will not collect the tax and will undercut the price of companies that do.

Some services were spared the tax.

Larry Kuebler, the director of golf services for the Jackal Golf Club at Mt. Brighton in Brighton, said scrapping the golf course tax was a good idea.

"To try and tax us as business people and then try to tax us as citizens is basically like double-dipping," Kuebler said.

He said if the tax had remained on the table, Jackal Golf Club would have had to consider raising prices to account for the loss of business.

Kuebler said he still is worried about the 6 percent tax for ski lifts. The tax might affect business at the Mt. Brighton Ski Resort.

But for Robbin Mann, 53 of Romeo, a services tax would not bother her. "I don't have a problem with adding a tax to luxuries like a tanning booth or ski lifts," Mann said. "Those are nonessential things. I have a major problem if they try to implement a tax increase on the middle class, though."

Detroit News Staff Writer George Hunter contributed to this report.