MICHIGAN - When you head to the ballot box on August 5, you’ll see one statewide proposal that asks whether you support repealing the state’s personal property tax (PPT) levied on businesses in Michigan.
It reached voters after state lawmakers voted to phase out the tax by 2023, but it still needs public approval before taking effect.
Despite the fact that there’s no organized opposition, the repeal of the PPT is not guaranteed.. That’s because voters seem to have a tendency to reject issues dealing with taxation. In this case, it’s the elimination of a tax that, unless you’re a business owner, you’re not paying.
“There’s no increase in taxes for anyone in this proposal – none,” said John Weiss, executive director of the Grand Valley Metro Council.
Supporters are also concerned the language of the proposal itself could be confusing.
“Ballot language is written by lawyers, probably, not by voters,” said Weiss.
APPROVAL OR DISAPPROVAL OF AMENDATORY ACT TO REDUCE STATE USE TAX AND REPLACE WITH A LOCAL COMMUNITY STABILIZATION SHARE TO MODERNIZE THE TAX SYSTEM TO HELP SMALL BUSINESSES GROW AND CREATE JOBS
The amendatory act adopted by the Legislature would:
- 1. Reduce the state use tax and replace with a local community stabilization share of the tax for the purpose of modernizing the tax system to help small businesses grow and create jobs in Michigan.
- 2. Require Local Community Stabilization Authority to provide revenue to local governments dedicated for local purposes, including police safety, fire protection, and ambulance emergency services.
- 3. Increase portion of state use tax dedicated for aid to local school districts.
- 4. Prohibit Authority from increasing taxes.
- 5. Prohibit total use tax rate from exceeding existing constitutional 6% limitation.
Should this law be approved?
[ ] YES
[ ] NO
Those are among the reasons lawmakers and the business community are concerned their efforts to repeal the PPT could fail.
“When you have bipartisan support, and I’m going to go back to this because you never see it anymore, I would say that that’s a good indicator that this is good for Michigan," said Dan Vander Molen, co-owner of Van’s Pattern Co.
Van’s makes stamping dye for the auto industry. The company has eight machines, known as CNCs, computer numerical controlled mills, that shape Styrofoam.
“We still have our first CNC that we bought,” said Vander Molen.“It’s over 20 years old, about 25 years old, and, of course, we’re still paying taxes on it.”
The PPT is also referred to as a double tax because businesses pay the 6 percent sales tax on equipment when it’s purchased and then on its assessed, decreasing value, every year after, which makes it complicated to administer.
The money collected is shared among municipal governments to fund local services.
“Some of our municipalities, over 50 percent of their operations come from the personal property tax,” Weiss said.
By simply eliminating the PPT, governments would be out millions of dollars, which is why there’s a replacement element.
The measure sets up a statewide authority that will receive a share of Michigan’s use tax. That money would be used to reimburse local units of government for the loss in PPT revenue.
“No one’s going to lose: police, or fire, or library, or jail, or court services or those essential services that local governments provide,” said Weiss.
But that’s not all.
“The manufacturers and heavy industrial users will pay an assessment fee to local governments,” Weiss said. “Then, we have the elimination of, the expiring of, the tax credits given by the state of Michigan to entice businesses.”
Business groups, like the Grand Rapids Area Chamber of Commerce, say the elimination of the personal property tax would make Michigan more competitive.
“Very few other states, none in the Midwest, have this tax and so it’s a disincentive for business,” said Rick Baker, president & CEO of the GRACC.
Ads in support of proposal one go so far as to suggest the PPT’s repeal would boost hiring.
Of course, nothing is guaranteed.
“I don’t think the elimination of it is going to make me run out and hire an employee,” Vander Molen said. “Maybe it means I can give more raises to my employees and they can spend more money in the community.”
If voters do not approve the repeal of the personal property tax, it will remain in effect, which supporters say will continue to cause problems for not just local governments, but state government, too.