In the looming battle over Gov. Rick Snyder’s proposed personal property tax repeal, both sides agree on one thing: It’s a tax neither particularly likes.
"This is an investment penalty," said Lt. Governor Brian Calley before a Senate committee Wednesday. "The more you invest, the more you pay."
The Michigan Chamber of Commerce and the Michigan Manufacturers Association, among others, echo that view, saying the PPT discourages new businesses from moving to Michigan and existing companies from expanding.
“Our members don’t love it either,” said Summer Minnick, director of state affairs for the Michigan Municipal League. “It’s a hard tax to collect and to audit.”
Since the personal property tax is assessed on equipment inside those buildings, local governments rely on businesses to report when they buy machines, desks, computers and other furnishings. As Hamtramck Mayor Karen Majewski said at a rally to protect local government funds generated by the PPT, "The personal property tax is cumbersome."
Calculating the taxable value of equipment is time-consuming and expensive for business and government, partly because Michigan uses a different set of depreciation tables than the federal government, a recent study by the Anderson Economic Group found. Complying with the personal property tax costs businesses on average 37 percent of the revenue the tax generates, the study found. In some cases, it costs businesses more to comply with the law than the amount of personal property tax they pay.
“We are not aware of any other major statewide tax that has compliance costs of this magnitude,” the study’s authors wrote.
The plan to phase out the personal property tax on large industrial companies and exempt smaller industrial and commercial businesses with taxable assets of less than $40,000 appears to have strong support among Republicans, who control both houses of the Legislature.
“I can tell you in the Senate there’s a lot of support for it,” said Sen. Mike Nofs, R-Battle Creek, sponsor of bills phasing out the tax. “Everybody up here, at least on the Republican side, campaigned on a promise to create jobs. That’s what got us elected.”
The repeal has similarly strong support in the House, said Ari Adler, a spokesman for House Speaker Jase Bolger, R-Marshall.
“I think we have significant momentum behind this,” said Mike Johnston, the Michigan Manufacturers Association’s vice president for government affairs.
That’s one reason organizations representing local governments and public schools aren’t so much opposing repeal as they are pushing a constitutional amendment to guarantee the lost revenue will be replaced.
That approach, however, drew a chilly response during the first hearing on PPT repeal in Lansing Wednesday.
Senate Finance Committee Chairman Jack Brandenburg, R-Harrison Township, told a representative of the Michigan Association of Counties, which backs an amendment, that he found the sentiment "troubling." Sen. John Pappageorge, R-Troy, was even more direct:
"I beg you to drop off this constitutional amendment stuff."
A constitutional amendment requires a two-thirds vote of both houses to place it on a statewide ballot and majority approval ofMichiganvoters. If the Legislature fails to approve the amendment, backers could try to force a statewide vote, but first would need to gather some 258,000 valid petition signatures.
Senate Minority Leader Gretchen Whitmer, D-East Lansing, said lawmakers might come up with a way of guaranteeing replacement revenue short of a constitutional amendment.
“I think as a piece of legislation starts to move through the process, we’re going to fight every step of the way to be sure the replacement revenue is there,” she said, adding she does not oppose repealing the personal property tax.
“Actually, an argument can be made that the personal property tax should have been the first reform” before last year’s replacement of the Michigan Business Tax with a new Corporate Income Tax, she said, “because it would have benefited Michigan business and only Michigan business.”
Passage of the personal property tax repeal “depends on whether the governor gets out and rolls up his sleeves and gets to work,” she said. “He likes to put out obscure objectives without a clear plan.”
Snyder is committed to seeing the repeal through, his spokesman, Ken Silfven, said. “The sooner the better,” he said. “This has been on our radar screen for a long time. I think there is, for the most part, a widespread recognition that this tax does nothing to help Michigan and is a pretty significant obstacle to growth.”
During Wednesday's hearing, Sen. Mark Jansen, R-Gaines Township, may have summarized the state of play over the issue:
"At the end of the day, everyone's going to have indigestion."
Pat Shellenbarger is a freelance writer based in West Michigan. He previously was a reporter and editor at the Detroit News, the St. Petersburg Times and the Grand Rapids Press.