Personal property tax reform starts
LANSING – The first of a series of bipartisan bills that will provide more stable local government revenue for essential services including police and fire protection as the obsolete, job-killing personal property tax is phased out was recently signed into law.
The changes are supported by a broad coalition of local government, school and business organizations, and would provide an estimated 100 percent reimbursement to municipalities for lost personal property tax revenue. Currently, a municipality’s personal property tax revenue can be significantly impacted by the loss of an employer. This package offers more financial stability to municipalities as they provide services that enhance the quality of life for all Michiganders.
The changes will require voter approval in August.
“The personal property tax served as a disincentive for businesses to locate in Michigan, and discouraged companies already here from purchasing equipment that helps them grow and create more and better jobs,” Gov. Rick Snyder said. “It was painful for our small businesses that provide so many of our state’s jobs. That tax needed to be eliminated to make Michigan more competitive and help our state’s economy. At the same time, we want to make sure our communities have a stable flow of revenue to help them provide services such as police and firefighting. The bipartisan package is fair and addresses both of those critical needs.”
The personal property tax harmed manufacturers that rely on expensive tools and equipment and small businesses were hit with compliance costs that often exceeded the amount of taxes they paid. Firms were hesitant to add equipment because each purchase raised their tax obligation.
The proposed reforms allow local governments to have ownership of a portion of the state’s use tax, which is currently levied on a variety of transactions not covered by the sales tax, including vehicle transfers, hotel stays and mail order purchases from retailers in other states. The reforms will not increase the use tax, which cannot exceed six percent under the state constitution.
Snyder signed Senate Bill 822, sponsored by Sen. Dave Hildenbrand, R-Lowell, which gives locals title to a share of the state’s use tax in order to provide an estimated 100 percent reimbursement to local governments. The bill also includes ballot language for an Aug. 5, 2014 referendum on the bill.
The governor also signed House Bill 4478, sponsored by state Rep. Andy Schor, D-Lansing, which allows for changes in how ballot language is set before voters.
Snyder also signed SB 825, sponsored by state Sen. David Robertson, R-Grand Blanc, which amends a prior law and will allow SB 822 to be submitted to voters in August.
Additional legislation is expected in the coming month.
Business leaders and local government representatives support the reform efforts.
“We applaud the enactment of this legislation as an important first milestone in the effort to permanently exempt many of our small businesses from this outdated and unfair tax,” said Small Business Association of Michigan President and CEO Rob Fowler.
Utica Mayor Jacqueline Noonan, president of the Michigan Municipal League board of trustees, said local government leaders depend on a stable revenue source to provide services.
“The League’s message for personal property tax reform has been consistent from the beginning: full, guaranteed replacement,” she said. “We appreciate that the governor and Legislature have insisted upon fully reimbursing local communities so we can provide essential services and invest in communities. We look forward to working together to attract talented workers and create jobs in vibrant communities.”