With the personal property tax (PPT) that generates as much as $1.2 billion annually, according to some estimates, seemingly on the chopping block with Republicans controlling the Governor’s Mansion and the state Legislature, local units of government are facing a possibly precarious situation, particularly those with tax bases that are largely commercial. Although we do see the merit in nixing the PPT — which we see as a roadblock to business expansion and retooling in a time when the Michigan economy desperately needs a spark — we urge lawmakers to adopt a repeal that holds local units of government harmless during these difficult fiscal times.
Senate Bill (SB) 883, introduced in December by state Sen. Dave Hildenbrand (R-Lowell) and co-sponsored by state Sen. David Robertson (R-Waterford), would eliminate the PPT on new personal property — specifically, new business equipment — by the end of this year.
But that is just one of a spate of proposals coming out of the GOP-controlled state Legislature to axe the PPT. Another is SB 766, which would phase out a portion of the PPT. State Sen. Mike Kowall (R-Commerce, Highland, Milford, Walled Lake, Wixom, Wolverine Lake, White Lake, Orchard Lake, West Bloomfield) is a co-sponsor of that bill, along with Robertson.
With the wide array of legislation geared at doing away with the PPT, at least in part, Republicans have the levy in their crosshairs — and for good reason. Businesses may be holding off on new equipment investment, among other things, since they would pay more in taxes each year on the upgraded equipment — some of which would be needed, for example, to retool or even change directions with a company. Especially in this economy, businesses shouldn’t be punished for getting state-of-the-art machinery or equipment, or looking to adapt themselves to the changing economic reality.
Yet local units of government, including some in west Oakland County, have a heavy reliance on the revenues generated by the PPT. And in an economic climate that has forced governments to consider — and even implement — such drastic steps as whittling back public safety personnel, for example, another blow to their revenue stream, particularly in communities with significant industrial tax bases, could be too much for them to withstand.
Lawmakers are on the right track with the PPT repeal, but they also need to make sure that any revenue that tax would have generated for the locals is replaced in some way, shape, or form.