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Monday, 30 April 2012 08:01

Bills propose sweeping changes to PPT laws

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LANSING — Business advocates view a proposal to reform Michigan’s personal property tax as another solid step toward improving the state’s business climate and competitiveness.

Coming on the heels of the 2011 elimination of the Michigan Business Tax and creation of a simpler 6 percent corporate income tax, the eight-bill package to change the personal property tax falls short of the outright repeal that may business groups have long sought. Yet many still voiced support for the proposal, which seeks to strike a balance between reform and replacing much of the revenue the tax generates to support public services provided by townships, cities and counties.

“We’re not 100-percent happy with what the reform looks like, but it is definitely encouraging,” said Andy Johnston, VP for government affairs at the Grand Rapids Area Chamber of Commerce that has advocated complete repeal of the personal property tax.

“This is definitely a first step going forward,” Johnston said. “This is absolutely necessary for us to build on the reforms that have been enacted.”

Business advocates for years have argued the personal property tax is a disincentive for businesses to invest in growth. They view Gov. Rick Snyder’s legislative package, introduced in the state Senate on April 17, as progress toward phasing out the personal property tax.

“As Michigan’s recovery builds, we need to remove traditional barriers to growth. We look forward to working with Gov. Snyder’s administration and state leaders to help Michigan compete effectively for future growth. This legislation will be a major step forward in helping retain and attract new manufacturing investment and create even more jobs,” Mike Johnston, VP of government affairs at the Michigan Manufacturers Association, said in a statement.

The Michigan Chamber of Commerce said the legislative package represents “the first time in the last decade that a credible plan has been proposed” to change the personal property tax.

In testimony before the Senate Finance Committee during an initial hearing on the bills, Charles Owens of the Michigan office of the National Federation of Independent Businesses said the proposal “does not involve simply changing the mix of who pays what while leaving the tax unchanged from a revenue perspective.”

“Past efforts have always proceeded from the approach that the tax revenue raised by the personal property tax had to remain the same,” said Owens, state director for the NFIB. “This was a failed approach that only resulted in fighting among job providers with no real economic and jobs benefit overall.”

The legislative package would exempt small businesses with personal property with a taxable value of less than $40,000 from paying the tax as of Dec. 31, 2012. Starting in 2016, the state would begin phasing out over seven years the tax on manufacturing equipment that’s more than 10 years old, according to the proposal Lt. Gov. Brian Calley presented to the Senate Finance Committee the day after the bills were introduced.

Manufacturing equipment purchased and put into service in Michigan after Dec. 31, 2011 would fall under the exemption after Dec. 31, 2015, leaving equipment purchase between 2006 and 2011 subject to the tax.

Come 2016, an estimated 70 percent of all industrial personal property and 40 percent of commercial personal property would become exempt from the tax. The bills would exempt all manufacturing personal property by 2022, according to Calley.

Backers of the bills note that most neighboring states in the industrial Midwest do not tax manufacturing equipment, putting Michigan at a competitive disadvantage. Illinois still partially taxes manufacturing equipment.

Using revenue from expiring tax credits, the proposal would require the state to establish a fund in 2016 to reimbursement local governments 98 percent of the revenue they’d lose under the proposed reforms.

Critics from municipalities and schools that rely on revenue generated by the personal property tax worry about the proposal’s impact on local budgets and are lobbying to ensure that 100 percent of the revenue it generates gets replaced. Under the “Replace Don’t Erase” coalition, they’re pushing for a state constitutional amendment that would guarantee full replacement of funds lost under any personal property tax reform.

“Under the Senate bills, the Legislature and the governor would basically take hundreds of millions of local tax revenues from local communities and schools and give future legislatures and governors new powers to keep the money or decide if any of the funds are ever returned to local communities and schools,” said Michigan Municipal League CEO Dan Gilmartin.

Senate Democrats in Lansing were sharply critical of the proposal.

“We simply cannot solve our state’s problems by blindly handing out money to corporations and hoping they’ll create new jobs here,” said Sen. Gretchen Whitmer, minority leader in the state Senate.

In Kent County, the personal property tax generates $9.0 million annually for county government, $3.6 million for the City of Grand Rapids, and $3.1 million for the City of Kentwood and $2.8 million for the City of Wyoming.

“It really has been a significant source of local government revenue,” said Grand Valley Metro Council Executive Director John Weiss.

Read 1820 times Last modified on Saturday, 04 August 2012 16:01

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