Michigan voters to decide fate of business tax cut

An effort to end a state tax on manufacturing and small business equipment that is years in the making will be decided by Michigan voters during the upcoming primary.
AP Wire
Jul 20, 2014

 

Proposal 1, the only statewide question on the Aug. 5 ballot, would reimburse local governments for their lost personal property tax revenue by sharing a portion of the state's use tax.

The personal property tax is paid by businesses and particularly manufacturers and is based on the value of their machinery, office furniture and other equipment. Some Michigan communities rely on the tax revenues to pay for basic services.

State lawmakers already have voted to repeal the tax on small businesses and manufacturers, but the issue still needs voter approval. The measure has no organized opposition.

A closer look at the ballot measure:

QUESTION: Why do proponents think it's necessary?

ANSWER: Michigan's business community never was a fan of the personal property tax, which applied to machines, office furniture and other equipment.

Business owners said it discouraged investment and was a compliance headache.

Gov. Rick Snyder called the tax "dumb" and said it was a disincentive for businesses to come to the state.

Q: If passed, what would be the impact of the proposal?

A: Job growth for one, according to an analysis by the Mackinac Center for Public Policy.

If Proposal 1 passes, three new exemptions would eventually go into effect for certain businesses that currently pay personal property taxes, according to James Hohman, who wrote the policy brief for the Midland-based free-market think tank.

Those exemptions would result in a tax cut of more than $600 million annually, the analysis found.

"The state is going to absorb the revenue lost from these exemptions while cutting the personal property tax," Hohman said. "It's a hefty tax cut that should encourage job growth."

Q: Would local governments make out OK?

A: That is the key.

Counties, cities and townships rely on revenue generated by the personal property tax.

But under a deal reached by Gov. Rick Snyder's administration, lawmakers, municipalities and businesses, local governments would see the lost money fully replaced by a portion of Michigan's 6 percent tax on out-of-state purchases, lodging assessments and telecommunications.

Supporters call it a win-win.

"It solves two major problems without raising taxes," AARP Michigan President Thomas Kimble said. "It eliminates a non-competitive tax on local small businesses and keeps local communities whole so they can continue to provide vital services."

Q: Why is Proposal 1 on the ballot if the Legislature already approved it?

A: Michigan requires voters to approve certain changes to the way taxes are distributed.

A phase-out of taxes on industrial machinery starts in 2016, and small businesses already have gotten a 100 percent exemption.

If voters do not approve the proposal, the laws enacted by Snyder and the Legislature will be halted.

The wording of a business tax proposal as it will appear on Michigan voters' ballots during the Aug. 5 primary:

Proposal 14-1

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 percent limitation.

Should this law be approved?

 

Comments

zwesterhouse

Ok then if this passes - will wages go to where they should be adjusted for inflation? Will factories cut back on mandatory overtime? Lets see in a year from now after it passes. I have my doubts on middle class getting any benefit.

skyking007

Cutting taxes means less revenue. Less revenue means cuts for the schools, roads, and anything else the middleclass need. It never trickles' down. vote NO on cutting taxes.

Zegota

I have my doubt rather the middle class will be here...at all.

fixitman

Why should a business property tax be stopped??? I have to pay property tax every year and I am not making money on my property. Where a business is making a profit every year on there business property. The schools are losing right now for tax money and you are going to cut what is going in by 600 million good old gov for you. They need to use their heads for something besides a hat rack.

Tri-cities realist

Do you continue to pay taxes every year on your refrigerator, stove, furnace, couch, bed, etc.? I didn't think so.

Freddo

So:
1. The state (or local governments within the state) will lose $600,000,000 in total revenue by eliminating the business property tax.
2. Local governments will be repaid from statewide use tax revenue.
3. The state won't be allowed to increase the use tax.
4. This means that the state will have a $600 million hole in its budget.

How, pray tell, will the state make ends meet? Public school funding has been cut repeatedly. Despite a marginal increase for the upcoming school year, it is still below what it was 5 years ago, and that's before we start considering inflation. A cursory look at West Michigan roads tells us that MDOT doesn't have sufficient funds to fix everything that needs fixing. Other state programs have taken sharp cuts, too. How does the governor and the legislature plan to deal with this gap? We should have an answer to that before we vote on this proposal.

If this tax is inconvenient and a deterrent to investment, so be it. Replace or modify it. But cutting more than half of a billion dollars out of the state's budget with no plan to replace it is irresponsible. We can't bring prosperity Michigan by further slashing essential services. Why would businesses come to a state that prioritizes neither education nor transportation infrastructure?

polarize

The proposal makes sense! Why should "small businesses" ran by "middle class" people pay personal property taxes year after year on rusting aging filing cabinets, tube style computer monitors, and water fountains? There can never be incentive for already struggling small business on Main Street Michigan to invest in better technology that make them more competitive thus creating more job demand.

Everybody wins! Small business, middle class and customers. The so called hole in tax funding is quickly filled with sales and income tax revenue from increased sales and profitability. I never could understand the logic of overtaxing property and income of Michigan citizens rather than investing in increased commerce.

With the Pure Michigan campaign spending millions on tourism, a more logical choice is a slightly increased sales tax that is inline with other states while lowering property taxes for everyone and eliminating state income taxes. There is no question that the increased commerce from tourism would far exceed any cuts yet every citizen benefits.

Mystic Michael

"No question"? It might be nice for Michigan citizens to see the results of a realistic, non-partisan, competently implemented econometric study that clearly establishes the truth of your assertion - so that they don't have to simply take it on faith. Faith-based governing hasn't had such a great record - as the nation's collective experience from 2001 to 2009 has amply demonstrated.

Not persuaded? Take a good, hard look at the current economic condition of Kansas - faith-based, "trickle down" economics at its most revealing.

newsblogger

Or look at NYC which is offering tax free for businesses for 10 yrs.

Harry Kovaire

Vote Yes and support this proposal. It is revenue neutral.

The current method of collecting this tax revenue is absurd and needs to be fixed for the health of the economy.

Here is a good video description of the proposal.

http://video-embed.mlive.com/ser...

 

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