LANSING, Mich. — Some agricultural services would take a hit under a tax extension in Michigan, aimed at raising more than $600 million in additional revenue during the next fiscal year to help close a hole in the state’s ailing budget.

At the heart of the revenue package is raising the state income tax from 3.9 to 4.35 percent, extending the state’s existing six percent sales tax to include 23 additional services and reforming teacher health and retirement benefits.

Under the sales tax extension, Michigan’s agriculture industry would pay the six percent sales tax for warehousing and grain storage services, technical consulting services and landscape services.

Michigan lawmakers last week passed the state’s 2008 budget agreement, but the state’s financial crisis is far from settled. The ink was barely dry on the Oct. 30 budget deal when lawmakers turned to the issue of repealing the service tax – one of the building blocks of a budget deal approved by both lawmakers and Michigan’s Democrat Gov. Jennifer Granholm.

The tax package would generate an estimated $618 million in additional revenue in the 2007-08 fiscal year and about $751 million in 2008-09. In the early hours of Oct. 1, Michigan suffered a four-hour partial government shutdown due to its $433 million budget shortfall.

State Rep. Judy Emmons (R-Sheridan), who owns and operates a Holstein dairy farm with her husband, Jerry, near Sheridan, voted for the tax package but said, “it needs to be revisited.”

“It all transpired at the end of September with a deadline looming. I don’t think any of us who weren’t privy to the inside negotiations were aware of the ramifications and the broad effect of it,” she said.

The income tax hike took effect Oct. 1, and the additional sales tax levy on services is slated to start Dec. 1. However, Emmons said she doesn’t believe the state or providers of the services are ready for the change.

“We still don’t really have a good handle on what is covered and what isn’t,” she said.

Also, she doesn’t want to see businesses spend a lot of time and money figuring out how to levy the sales tax if the measure may be repealed. “Just getting these businesses up and running and getting their systems in place to do this will cost them a great deal of money,” she said. “We now have less than 30 days to make this happen.

“This is what happens when you’re hasty coming up with a plan. It didn’t go through committee. They didn’t hear from all sides.”

Legislators now have turned their attention to the service tax. The Republican-led state Senate on Nov. 1 began the process of killing the six percent tax on services. By a 22-14 vote, the Senate sent a bill to the Democrat-controlled House that would delay the start of the expanded service tax from Dec. 1 to Dec. 20, giving lawmakers more time to repeal the tax and replace the lost revenue.

Granholm has said she could support repealing the tax only if an equal amount of money is raised so payments for state programs aren’t affected.

“There’s some talk of putting a surcharge on the Michigan business tax so we can get rid of the services tax,” Emmons said.

The Coalition to Ax the Tax, made up of businesses and lobbying groups, doesn’t think the revenue should be replaced. The group announced during a Nov. 1 news conference that it would collect signatures to let voters decide in November 2008 whether the tax should be repealed, if lawmakers don’t do it first.

Granholm spokeswoman Liz Boyd said the replacement must be permanent because that was part of the original deal.

Either way, Michigan continues to struggle with its ailing budget. Lawmakers and Granholm already put a bandage on the budget by cutting spending $435 million, raising about $700 million through the income tax hike and raising another $600 million through the service tax.

“This is not how you should manage” taxpayers’ money, Emmons said. “(We need to) exercise a little more scrutiny. If we have learned anything, I hope that we have learned that.”