When Republicans gained majority in the House, they pledged to help businesses grow by reducing their tax burden. Republicans have done so in many ways – including the elimination of the oppressive Michigan Business Tax – but today, we focus on changes to the Personal Property Tax (PPT). That’s why we’re throwing it back twice: to the first time the PPT was reformed in 2012 as well as back to March, when it was reformed again, heading to the August ballot as a result.
Prior to the 2012 changes, Michigan’s PPT system was a deterrent to job growth and acted as a punitive, job-killing tax for Michigan’s small businesses. In fact, no other state in the Midwest had a similar tax, and drastic changes were necessary to allow Michigan to compete with other nearby states.
While the modifications of 2012 helped spur job growth, Republican leadership knew that greater reforms of the PPT were necessary to further aid Michigan’s comeback. In that regard, the Personal Property Tax and Local Revenue Stabilization Package (Senate Bills 821-830) worked its way through the Michigan Legislature.
“The most visible change will be that many of Michigan’s small businesses will not have to pay a tax on equipment, and that’s something we haven’t seen in Michigan in 100 years.”
— Rep. Jeff Farrington, chair of the House Tax Policy Committee
The bill package that passed the Legislature with major bi-partisan support made some significant changes to the PPT. Specifically, the changes ensure local municipalities have the budget protections they need, which in turn will assure that local services like police and fire are fully funded. The package does this by providing for 100 percent reimbursement to local units of government for revenue lost as a result of the PPT phase-out. What’s more, the package also provides for an average 80 percent reduction in taxes businesses must pay to the government.
Under the new laws, the reimbursements will come from dedicating a percentage of the Use Tax to local governments and schools — in addition to the portion of the Use Tax already constitutionally dedicated to the School Aid Fund. In fact, the reforms make it clear the 2 percent of the Use Tax currently dedicated to public schools will not be impacted by the changes to the PPT.
In a nutshell, the package addresses funding issues facing local municipalities and schools, as well as reducing the local tax burden for small businesses and manufacturers.
But as we work to eliminate the Personal Property Tax and protect revenue for our local governments, we also know the importance of making sure Michigan voters have a voice when it comes to major tax policy. The package that passed Michigan’s Legislature with overwhelming support included a provision that gives you, the voters, the final say on PPT phase-out plan.
When you go to the polls on August 5, you will have the chance vote on Proposal 1 and decide whether we should dedicate 1 percent of the existing 6-percent Use Tax to local governments.
It’s important to learn all you can about Proposal 1, so below is the specific language that will be on the ballot come August 5:
If you have any further questions, please reach out to your state representative.