The latest edition of an annual scorecard says Michigan’s economy hasn’t fully rebounded since COVID. But it finds some bright spots among small businesses and female entrepreneurs.

The Small Business Association of Michigan’s Entrepreneurship Score Card assesses the state’s entrepreneurial economy compared to that of other states.

“The Score Card consistently shows that small businesses play an indispensable role in our economy in both good and bad economic times,” SBAM President and CEO Brian Calley said in a statement. “While there has been impressive rebound in some areas, Michigan’s economy has not shown its typical exuberance and is now lagging behind neighboring states.”

The report noted that over a 20-year period, Michigan seized and then dropped a leading position in net new jobs from business expansions.

Between 2011 and 2019, Michigan’s job growth made it one of the best-performing states in the region. Since the 2020 COVID recession, Michigan has continued to decline toward becoming the lowest-performing state.

The per capita income gap between Michigan and the rest of the nation has worsened in the last 20 years.

Michigan saw small business growth between 2012 and 2018, but that progress deteriorated after 2020.

The report noted that since the mid-2010s, Michigan’s small business survival rate has improved. Michigan also ranks in the Top 10 for R&D and high-tech workforce jobs.

Michigan faces a projected population loss of around 700,000 residents by 2050, according to a Citizen’s Research Council of Michigan report. The population loss might be exacerbated by the state’s falling labor force participation rate, which has been dropping for 20 years.

New business formations continue to drive job growth and diversify Michigan’s economy.

The fastest-growing businesses, by size, have been the smallest ones — those with one to nine employees. Their number increased by 30% in the past 20 years.

Sole proprietors have become more prevalent, and smaller businesses have seen faster growth than large ones. Payrolls have grown among the smallest businesses by 103% in the last 20 years, nearly double the increases seen by large businesses.

The income of Michigan’s sole proprietors has, in the past 10 years, grown faster than the national average. Michigan exceeds the national average in another category: the share of businesses owned by women.

Rep. Ken Borton, R-Gaylord, blamed Democratic policies for the economic slump. In 2022, voters gave Democrats a political trifecta, with control of the Michigan House, Senate, and governor’s office.

“Under Republican leadership, Michigan made a comeback, but now small-business growth, job creation, and family incomes are lagging on Democrats’ watch,” Borton told CapCon in an email. “Destructive Democrat laws are raising taxes, hiking electricity costs, and adding new burdens on employers. Michigan needs a bold, coordinated economic growth plan, and House Republicans are leading the way with plans to cut red tape, measure program performance, reverse Democrats’ income tax hike, and restore the right to work so business can grow and people can succeed.”

Owners of short-term rentals may have to deal with more regulations and additional taxes under a new package of bills introduced in the Legislature.

House bills 5437-5446 aim to create the Short-Term Rental Regulation Act, which would subject certain short-term rental owners to new regulations. The regulations would apply to property rented for more than 14 days in a calendar year. Existing local ordinances would remain.

The bills would also apply to hosting platforms such as Airbnb and VRBO, which would have to pay an annual registration fee equal to $100 per listing, not to exceed $50,000 per year.

State Rep. Joey Andrews, D-St. Joseph, said the bills seek to allow local government to regulate short-term rentals.

“In communities all over Michigan — especially, but not exclusively, communities such as those I represent along the lakeshore — STRs are creating regulatory headaches at best and serious safety concerns at worst,” Andrews said. “It’s long past time we put some reasonable guardrails in place to allow local governments to address STRs, respect the needs of permanent residents and bolster our tourism economy.”

The bills would impose registration requirements, safety regulations, and obligations to file paperwork with the state treasury department.

Mark Florian is a trustee of Berrien County’s Lincoln Charter Township and a short-term rental owner. He opposed the plan at an April 17 committee hearing.

“We have an ordinance that regulates short-term rentals,” Florian said. “If we need another law or package of laws to enshrine a law or power that already exists then maybe we need to take a step back and remove the ambiguities within the current laws.”

Short-term rental owners already pay a 6% use tax on rental income. If the bills pass the House and Senate and are signed into law, short-term rental owners renting more than 14 days per calendar year will have to pay an additional 6% accommodations tax, which hotels and motels pay.

Short-term rentals would also be subject to an additional 5% excise tax not imposed on hotels and motels.

For example, the owner who charges $1,000 for rental property, would have to pay $60 in use tax, a $60 accommodations tax, and a $50 excise tax. That is $170 or 17% of the property owner’s earnings.

The nonpartisan House Fiscal Agency estimated, using limited data on the short-term rental market, that the 6% excise tax in House Bill 5438 could generate between $35 million to $70 million annually.

The plan proposes civil fines of $1,000 for short-term rental owners who violate the act or a $5,000 fine for hosting platforms.

Under the plan, rental owners must insure each rental unit with a minimum of $1 million in liability insurance.

HB 4537 was referred to the Committee on Labor.