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Home News  Prop 1: new tax and new revenue
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Wednesday, July 30,2014

Prop 1: new tax and new revenue

by Matt Mikus
It seems clear cut: Vote for Proposal 1 and businesses will no longer pay a tedious tax, while local governments continue to collect funds to spend on police and fire departments.

If approved Tuesday, Proposal 1 will eliminate the state personal property tax that requires businesses to itemize the value of their equipment, and based on the value, pay a small tax to local governments. It also establishes an annual essential services assessment for business, in effect a replacement tax. Revenue from this tax, $20 million initially rising to $117.5 million by 2027-28, will be distributed to local governments by a new authority.

States around the country are removing their version of the personal property tax. As in Michigan, they believe it encourages new businesses.

“Legislators have been talking about scraping personal property tax for a while,” said Judy Allen, director of government relations at Michigan Townships Association, “but the biggest problem is local governments rely on the revenue from businesses and services to fund things like police and fire.”

“I don’t think there’s any need to have it on the ballot at all,” said Rose Bogaert director of the Wayne County Taxpayer’s Association, a conservative volunteer tax policy organization. Itīs on the ballot, she said, the Headley Amendment requires a vote on new local taxes, in this case, the essential services assessment.

State Rep. Vicki Barnett (D-Farmington Hills), said she supports the concept behind the ballot, but is concerned with how the proposal operates.

The initiative shifts revenue collected through the 6 percent use tax on out-ofstate purchases away from the general fund to the new local government fund. The general fund loss will be replaced by savings from expiring battery manufacturer credits.

Manufacturers who were paying personal property tax at the end of 2012 will contribute though the statewide essential services assessment, and local governments will be reimbursed for “100 percent for their [personal property tax] loss related to essential services,” according to the Michigan Municipal League. New businesses, and non-industrial businesses will no longer pay a tax on their equipment.

The new Local Community Stabilization Authority will determine how the funds are distributed.

“This authority is elected by no one,” said Bogaert, who worries about the arrangement. “The amount of reimbursement will be set by the state. But the legislature can change the statute at any time. There’s no guarantee that the funds will go to local governments.”

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