Repealing the Personal Property Tax (PPT) and Replacing Revenue for Local Governments

The August ballot will include a single proposal (Proposal 14-1), which would repeal the Personal Property Tax, which taxes business owners’ equipment. The tax has been attacked by Republicans as a major job killer and as a damper on Michigan’s competitiveness in the Midwest. Reforms of the PPT have been passed by the legislature twice, first in 2012 and then in 2014, but the ballot proposal is the final piece to officially phase out the tax. The legislation passed in 2014 defined what the revenue replacement formula would look like.

Municipalities will recover almost all lost revenue through the new formula. In some manufacturing municipalities the PPT accounts for nearly 50 percent of revenue, which makes the revenue replacement formula crucial in many areas of the state. Proposal 14-1 has been estimated by the House and Senate Fiscal Agencies to be revenue neutral and is viewed by some as tax relief. The $500 million in tax relief will direct money into a newly created statewide agency. The agency’s main directive will be to reimburse local agencies for their lost revenue.

In an effort to offset the reimbursement, $600 million in business tax credits will expire and starting in 2016 companies benefitting from the PPT relief will help reimburse municipalities via a new state assessment. There has yet to be any organized opposition to the proposal, while the Michigan Citizens for Strong and Safe Communities coalition including the MMA, MML, Business Leaders for Michigan, and the Michigan Business and Professional Association are all in support of the proposal.

posted by PAA Online , Friday, July 11, 2014 10:18 AM
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