The latest in a string of proposals to repeal the state’s personal property tax (PPT) would require a vote of Michigan’s voters to replace it.
Lt. Gov. Brian Calley and Republican legislative leaders unveiled a new framework last week for phasing out the PPT — which generates millions of dollars annually for local governments — over the span of a decade and replacing some of that revenue with a portion of the existing Use Tax, which is a business tax paid on out-of-state purchases that is capped at 6 percent.
The revenues the state’s general fund loses would be recouped by letting certain tax credits expire, Calley and others announced last week.
“This is a fiscally-responsible strategy that helps to lay the groundwork for a more prosperous future,” Calley stated in a press release. “It’s an excellent compromise that balances the tax-relief needs of job providers with the revenue needs of our communities and schools.”
Officials said under the proposal 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.
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. 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 revenues from the PPT.
The Michigan Municipal League, while expressing thanks to Calley and legislative leaders and saying it’s “a significant improvement” over previous proposals to nix the PPT, said there are “still many significant issues that must be resolved” on the PPT proposal before the league is able to determine whether it supports or opposes it.
Many argue that axing the PPT will remove an onerous financial liability for companies looking to invest in new equipment or retool, but some in local government have been concerned about a possible loss of revenue.
“The PPT is a tax that punishes job creation while providing essential support for local governments,” said Speaker of the House Jason Bolger (R-Marshall) in a press release. “We need to reform this tax so that we can attract the investments that will create new jobs for Michigan’s workers. This reform will lead to more opportunities for Michigan families to succeed.”
State Sens. Mike Kowall (R-Commerce, Highland, Milford Township, Milford Village, Walled Lake, Wixom, Wolverine Lake, White Lake, Orchard Lake, West Bloomfield) and David Robertson (R-Waterford) have expressed support for repealing the PPT, but both have also said they are concerned about how local governments reliant on that tax revenue for substantial portions of their budgets will make that up.
“Reforming personal property tax has been at the top of the Senate’s agenda for quite some time,” said state Senate Majority Leader Randy Richardville (R-Monroe). “This is a tax that literally punishes our job providers for growth and expansion. In order to support our local businesses and attract new companies and industries to Michigan, we have to continue to eliminate obstacles to job creation.”