Mon July 14, 2014
WSW: Voters Will Decide Fate of Personal Property Tax
Most statewide ballot questions are decided in November. But one proposal on the August ballot would change how property taxes are assessed in Michigan.
Proposal One would phase out the "Personal Property Tax" in Michigan, and would replace the revenue that local governments currently receive from the tax. Many state lawmakers of both parties support the change, and there is no organized opposition. The Citizens Research Council of Michigan has prepared an analysis of the ballot proposal. The Council's Research Director Eric Lupher spoke with WMUK's Gordon Evans.
The Personal Property Tax is assessed on equipment, "everything that is not attached to the ground" says Lupher. He says it's a tax that has been unpopular for a long time. Lupher says the tax has been seen as adverse to businesses because it increases the cost of operations, and he says many critics have complained that business equipment was taxed twice because of the PPT.
The proposal put on the ballot by the Legislature would exempt industrial personal property from taxation. Lupher says that affects local governments more than state governments. So he said the state needed to find a way to guarantee the funding for local units of government. Lupher says that was complicated by a lack of trust between the state and local units of government. He says the solution is a new independent authority that will have taxing authority to reimburse local governments through a larger share of the use tax. Lupher says that won't increase taxes for residents. He says the state is counting on more money from tax credits expiring and a new "state essential services tax" to pay for the replacement revenue.
The specific question before voters is whether to levy the tax to reimburse local governments for lost revenue from the Personal Property Tax. But Lupher says if voters reject Proposal One in August, it would nullify the plan to eliminate the PPT. He says that would mean the Personal Property Tax would be collected again, and lawmakers would be searching for another solution.
Voter approval is necessary because of technical reasons. The authority created by state lawmakers was set up as a local unit of government. The "Headlee Amendment" to the state constitution requires a vote whenever a local unit of government wants to levy a tax.
The Citizen Research Council report shows the municipalities that rely most heavily on the Personal Property Tax revenue. That includes the city of Three Rivers and Covert Township in Southwest Michigan. Lupher says those local units of government should receive the same amount of tax revenue if Proposal One passes. Lupher says far more communities don't have industrial property, and don't rely on money from the Personal Property Tax.
The Citizens Research Council estimates that eliminating the Personal Property Tax will eventually mean about $300-million to $500-million less for the state general fund. Asked if that will mean spending cuts or increasing taxes later, Lupher says it's hard to know. He says if eliminating the tax spurs economic growth, then eliminating the tax may pay for itself. But if not, Lupher says difficult decisions will be required by lawmakers.