Lansing lawmakers and other top state officials are once again back from the drawing board with a new proposal to repeal the state’s much-maligned personal property tax (PPT) which is levied on business equipment — a more than 100-year-old tax that makes no sense and discourages the private sector from investing in Michigan or expanding existing operations. After years of discussions, and almost an entire legislative session with the PPT’s repeal or phase-out being a top priority of lawmakers, it’s high time that legislators put their money where their mouths are and finally get rid of the onerous levy.
The proposal unveiled by Lt. Gov. Brian Calley, state Senate Majority Leader Randy Richardville (R-Monroe) and Speaker of the House Jase Bolger (R-Marshall) is similar to other proposals to do away with the PPT, which generates millions of dollars annually for the state and local units of government, particularly those with a heavy manufacturing base. The phase-out would happen over time, and there is a mechanism in place to have the local units of government most vulnerable to its repeal recoup all, or almost all, of the revenue losses they would incur should the PPT get the ax.
That’s what we’ve called for from the beginning, and we’re pleased lawmakers have gotten the not-so subtle hint that they shouldn’t scrap the PPT without having some form of replacement revenue in the mix. With the proposal rolled out last week, that would come in the form of taking some of the existing Use Tax — the key word there is “existing,” so it’s not a tax increase — that would normally go to the state’s General Fund and shift that to the locals; the state would let certain tax credits expire to make up for its revenue loss. However, such a move would require a statewide vote of the people — which in and of itself leaves a significant aspect of the proposal to chance and practically at the mercy of interest groups’ eager to quash the proposal.
Officials said under the latest proposal, which was unveiled last week, that 100 percent of the revenue the PPT generates for most local governments would be replaced, and the School Aid Fund would be held harmless. The change in the state’s Use Tax would be revenue neutral, meaning that the state would not earn any more money through the shift.
Businessowners with a combined value of industrial and commercial property of $40,000 or less beginning in 2014 would not have to pay the PPT, which under the proposal would be phased out over the course of a decade. New manufacturing personal property purchased between 2012 and 2015, and eligible manufacturing personal property would be exempt beginning in 2016.
Eligible manufacturing personal property that was new in 2005 or earlier would become exempt from the PPT beginning in 2016, with the phase-out eventually becoming complete in 2022.
There would be no reimbursement of PPT revenue to local units of government that receive 2.5 percent or less of their annual revenues from the PPT, according to officials.
Lawmakers have been grappling with the PPT and how best to nix it over the last two years. While concrete proposals have been floated — some better than others — the tax, which is a significant inhibitor to business expansion and investment, something that state desperately needs, remains on the books. That needs to change.
It’s good that lawmakers are taking the time to be thoughtful and diligent about the PPT’s repeal and how best to go about accomplishing it while doing the least amount of damage to local units of governments’ bottom lines, but it’s time to act, and the Calley/Bolger/Richardville proposal seems like it has a lot to like about it — especially that most local units of governments would be held harmless, and that it’s a gradual instead of immediate repeal.
Legislators can talk all they want about reinventing the state and making it more business-friendly, but they have yet to do something it seems there’s a consensus on that would do just that — doing away with the PPT, which some estimates say generates $1.2 billion annually for the state and local units of government.
There’s just a few short days left in the lame duck legislative session. If lawmakers don’t act during this session, the returning and incoming crop of state legislators need to make the repeal of the PPT a top priority during the 97th state legislative session, which begins in January.
It’s all well and good to trumpet the repeal of the PPT. It’s another to actually do it. Here’s to hoping that it gets done this time around, and the Calley/Bolger/Richardville proposal provides a great framework for it.