Voters approve Proposal 1: Here’s what’s next for our state

Categories: Blog Features,In Case You Missed It,Initiatives,Jobs,Reinventing MI

PPT_fadeOn Tuesday, voters across the state cast their ballots, and when it was all said and done, Proposal 1 passed with nearly 70 percent support.

By giving final approval to Proposal 1, voters approved a Republican-led plan to phase out the burdensome personal property tax (PPT) which required small businesses to pay additional taxes on office equipment and manufacturers on industrial equipment.

The PPT put Michigan at a competitive disadvantage with neighboring states that had already eliminated similar taxes, so the phase-out of this tax will encourage even more business growth and investment in our state.

What’s more, the plan put together by Republicans ensured that local municipalities — and essential services like fire and police — would still have a stable source of revenue to replace the PPT funds.

We need to attract the investment in equipment that brings jobs to our state, not chase it away through taxes. We also need to protect the services of our local governments. That is why Proposal 1 is critical to our state’s brighter future.

— Speaker Jase Bolger

Michigan employers, local governments and voters alike are excited about the PPT phase-out, and for that reason, we thought we’d provide a quick overview of the finer details of Proposal 1. Here’s what’s next for our state:

Q: Who is immediately exempt under the PPT phase-out?

A: Michigan’s small commercial businesses — those with less than $80,000 total value of personal property or $40,000 in State Equalized Value (SEV) — will continue to be completely exempt from personal property tax (PPT), an exemption that began this year.

Q: How does the rest of the phase-out take place?

A: Manufacturing and industrial businesses will begin to see their PPT liability reduced starting in 2016, and phasing out completely over six years. Beginning January 1, 2016, any new equipment purchased by a manufacturing or industrial business after January 1, 2012 — and any existing equipment that is 10 years old on January 1, 2016 — will be exempt. Property that is less than 10 years old will become exempt once it reaches 10 years of age. By 2022, all manufacturing personal property will either be new or 10 years old and will therefore be exempt.

For example:

  • Equipment purchased after 2012 will be exempt beginning in 2016;
  • Equipment purchased before 2006 (10 years old) will be exempt beginning in 2016;
  • Equipment purchased in 2006-2012 will be exempt when it is 10 years old (2016-2022).

Q: But without those tax revenues, how will local governments still receive state funds for essential services?

A: Reimbursement to local units of government that relied on personal property tax revenue will come from the state dedicating a portion of the state’s use tax. The state can afford this reimbursement as a result of the expiration of over $600 million in Michigan business tax credits afforded during the last administration. Rather than picking a select few companies to provide tax relief as was done in the past, the Legislature’s efforts made possible through the passage of Proposal 1 now provides fair and broad tax relief to more Michigan employers.

By more than a 2-to-1 margin, voters in Michigan agreed that the PPT was an onerous and burdensome tax on job providers. Michigan-based employers will now be able to more freely compete against other states to attract employees and provide products and services in our Great Lake State. At the same time, local governments can rely on stable and consistent revenue for essential services from the state’s existing use tax.

It’s a win for businesses, a win for local municipalities, and a win for the entire state — ensuring all our futures will be brighter in a state that attracts new businesses and welcomes new jobs.