This August, voters will be asked to vote on Proposal 1, which will approve the plan to eliminate the personal property tax (PPT) paid by many job providers and to replace the lost local revenue with a portion of the already existing use tax. This proposal will be good for small businesses and local communities.
Currently in Michigan, all businesses must pay personal property tax every year on every piece of equipment—furniture, machinery, laptops, etc.—they own. So not only do local small businesses pay the 6% sales tax when they purchase the equipment, they also pay the PPT for every year they own it. Imagine paying a tax on your refrigerator, couch, stove, and TV every single year!
One example is Endurance Carbide, a family-owned company started in Saginaw in 1942. Every year since 1966 they have paid the PPT on a Landis External Grinder. That’s nearly half a century of taxation on just one piece of equipment.
This onerous tax is unique to Michigan and has put the state at an economic disadvantage when competing for new businesses and jobs. Last session, the legislature voted to eliminate this burdensome tax.
One of the biggest considerations the legislature faced when looking at this issue was finding a way to replace the lost revenue. Personal property tax revenue goes to local units of government and many communities rely on the money raised by the PPT to help fund services like education, police, fire, and ambulance services.
This ballot proposal will guarantee that 100% of a community’s lost revenue will be reimbursed. We will be redirecting to local governments a portion of the existing use tax that currently goes to the state general fund by dividing it into a state share and a local share. The local share will be increased to match the amount of lost PPT revenue, and the state share will be decreased by the identical amount, so the tax rate will stay the same at 6%, but will be distributed differently. The state revenue will be recoupedin part by eliminating special corporate tax credits issued during the last decade and by the essential services assessment paid only by manufacturers.
A growing list of supporters including businesses, local governments, police, fire, education groups, agriculture, newspaper editorial boards, and many more can be found at www.strongandsafecommunities.com along with additional information. You can also visit the Senate Fiscal Agency website at http://www.senate.michigan.gov/sfa/Publications/BallotProps/BallotProposalAug14.html for an in-depth analysis of the proposal.
This proposal is not a tax increase. The use tax will continue to be collected at a rate of 6%, the burdensome PPT will be eliminated, and local governments will have a stable funding source. This policy is good for Michigan and I support it.