Michigan slaps 6% tax on financial advice

Michigan lawmakers, desperately trying to fill a projected $1.75 billion budget deficit, have added a 6% sales tax to financial advisory services. The new tax, slated to go into effect on Dec. 1, applies to 23 services dubbed by proponents of the tax to be non-essential. The law change was approved during the past weekend’s legislative session in an effort to avoid a statewide government shutdown, which was threatened by Democratic Gov. Jennifer Granholm. In addition to the new service tax, Michigan’s income tax rate was also increased to 4.35% from 3.9%. “I think it’s a huge mistake and as a fee-only planner it pisses me off because it gives the commission [-based] guys a big advantage,” said Theodore Feight, owner of Creative Financial Design in Lansing, Mich. Adding insult to injury for Mr. Feight and others advisers is the fact that financial advice is being lumped into the same category as newly-taxed services such as tanning salons, psychic reading, escort services and massage. But most disturbing to some advisers is the idea of making financial advice less accessible in a state where many of the citizens are in dire financial straits. Michigan boasts the highest unemployment rate in the nation — 7.4% — which compares to 4.6% national unemployment rate. The loss of hundreds of thousands of manufacturing jobs over the past several years in Michigan has led to what analysts have characterized as a single-state recession. “I wrote my senator and state reps twice telling them not to pass this tax,” Mr. Feight said. “I guess I’m just going to have to tack [this new tax] onto my bill.” For the full report, see the upcoming Oct. 8 issue of InvestmentNews