SUMMARY:
The state Senate on Tuesday March 4th passed 10 bills by an overwhelming majority. These bills will provide for a compromise with local governments that will allow the local governments to recoup revenue lost by the phase out of the personal property tax. The compromise will likely make the phase out of the personal property tax more attractive to communities that currently rely on the revenue from this tax and therefore make reform legislation on the personal property tax more likely to pass in August of this year.
In 2012, the Michigan Legislature approved a reform to the personal property tax that currently applies to Michigan businesses. Starting this year, the personal property tax began its phase out with an exemption to the tax for small business with less than $80,000 in personal property (i.e. things like furniture, computers, equipment, etc.). The passage of the 10 bills by an overwhelming majority of the state Senate on Tuesday will continue the path to be rid of the personal property tax. The bills essentially create a compromise with local governments that stand to lose a lot of revenue with the end of the personal property tax. These bills provide that the local governments will make up for the loss of the personal property tax from businesses by receiving a portion of the state’s tax revenue that comes in from “use tax” on out-of-state purchases. In addition, the legislation would create an “essential services assessment” tax that would apply to these businesses in the absence of the personal property tax and go toward supporting things like police and fire operations in the cities where they operate.
The changes to Michigan’s personal property tax remaining under the reform and including the bills passed on Tuesday are contingent on popular vote in August of this year. However, with this compromise and the replacement of revenue to the local governments, the phase out of Michigan’s personal property tax is likely to be much more palatable to communities that currently rely on the revenue produced by this tax. With many businesses already in support of the phase out of the personal property tax, the support of communities would mean a much stronger chance of approval by the electorate in August.
