Red Robin restaurants are Michigan-bred, but owner Victor Ansara says it’s hard to justify expanding in the state with its current business taxes.

The chain has 22 Michigan restaurants and two in Ohio. If all 24 were in Ohio, it would have paid one-fifth of the state taxes it paid to Michigan last year, the company says.

Red Robin’s Ohio tax return is five pages. Its Michigan tax return is 270.

The number of restaurants wouldn’t change the length of the return.

“It’s a shame. My family has been in business in this state for 50 years,” said Ansara, a partner of Ansara Group, which also owns several Big Boy restaurants. “I would be more inclined to seek sites in Ohio versus Michigan right now.”

Not surprisingly, Ansara likes Gov. Rick Snyder’s plan to drop the current Michigan Business Tax in favor of a 6% corporate income tax. His company would not pay the corporate tax. Instead, he and his partners would pay the state’s 4.25% income tax on profits.

But Terry Conley, partner at tax specialist firm Grant Thornton in Southfield, said Michigan’s taxes aren’t that excessive compared with those in other states — especially for manufacturers, when tax-reducing credits are considered.

Without those credits, he said, “We don’t fare well. With them, we can compete with any state.”

Still, Conley generally likes Snyder’s plan. But their differing views of the current tax show the complexities of creating a more tax-friendly business environment.

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Terry Conley advises Michigan companies on state taxes, and his conclusion might surprise some:

Michigan’s business tax isn’t awful, especially for manufacturers, unless the company is losing money.

“If you’re a profitable company doing business in Michigan, compared to a lot of other states, the Michigan corporate tax burden is very competitive,” said Conley, a partner at the tax and audit firm Grant Thornton in Southfield.

“If you’re a company that loses money or has relatively low margins, then Michigan’s corporate tax is generally quite high.”

Conley said the tax credits woven into the Michigan Business Tax (MBT) keep the state tax competitive. Some of those credits should continue, he said, because without them, Michigan’s business tax would remain moderate or even high compared with the tax in other states.

Gov. Rick Snyder would eliminate most of the credits.

“For the governor’s plan to be successful, our overall tax structure must be very efficient, where you can say to a company looking to expand here, ‘Look, our (tax) incentives in this state are very minimal, but you don’t need them because we’re a low-cost corporate tax state.’ ”

Grant Thornton’s Chris Leader and Chuck Storeng prepared an analysis for the Free Press that compares how a variety of manufacturers, large wholesalers with warehouses and high-tech companies such as software developers would fare in Michigan versus other states. The analysis compares the MBT — without tax credits — to business taxes in Midwest and other states.

It shows that Michigan’s tax is generally in the middle when credits are stripped away. The model includes what companies’ employees would pay in state income taxes.

But when other state credits are factored in, Michigan comes up short. For example, compared with neighboring Ohio, Michigan is not tax-friendly for large wholesalers, who receive generous property tax credits not available in Michigan.

That’s why Ohio has a lot more distribution centers, Conley said.

Without tax credits, Michigan’s personal property taxes are among the nation’s highest, Conley said.

In another hypothetical example, a large Michigan manufacturer with $85 billion in sales would pay $943 million under the MBT without tax credits. The tax drops to $581 million — a 38% reduction — when the state’s credits for personal property and employee compensation are included.

For others with large revenues that can’t claim tax credits, the MBT can be costly.

Jeff Curry said the MBT isn’t favorable to his shipping company, Express-1. Curry, the president, calls the company “an ambulance service for commercial freight,” such as rush-order parts or equipment for automakers.

The company has 150 full-time employees in Buchanan, near the Indiana border.

When the state changed to the MBT in 2008, Express-1’s tax increased more than fivefold, from 4.7% to 25.5%, Curry said. Because Express-1 uses mostly independent truck drivers, the company cannot claim state tax credits for employee compensation. And the MBT’s gross receipts tax hits the business hard.

Curry said he opened a subsidiary in Indiana instead of in Michigan because of its lower taxes.

“Did we want to do that? No,” said Curry, a school board member for Niles Community Schools. “We are Michiganders, but we have to take care of business.” He said there are no plans to move his company headquarters to Indiana.

As a publicly traded company, Express-1 would benefit significantly from Snyder’s tax plan because it would pay a flat 6% on profits.

So would the privately owned Ansara Group, which owns 24 Red Robin restaurants, 22 in Michigan.

Victor Ansara said he and his four partners are double-taxed: Their company pays the MBT, and the partners pay the state income tax on their income from the company.

“That’s pretty crazy,” Ansara said. He said he’s not inclined to open more Red Robins in Michigan. Ohio, where he has two restaurants and where the company’s taxes are a fraction of what they are in Michigan, is a better bet, he said.

The company employs about 2,500 people.

Under Snyder’s tax plan, they’d pay only on personal income from the company, not a business tax, too.

“Snyder’s plan has certainty, simplicity,” Ansara said. “There are lot of things in that proposal that make sense.”

Source: Freep

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