Despite $300 million reduction, businesses seek relief

Michigan businesses, which have already won a $1.6 billion business tax cut, are pushing hard to repeal the state’s personal property tax on machinery, computers and other equipment.

But they don’t talk much about, or even recognize, the $324 million tax cut they’ve received since 2007, the result of falling property values and lower tax rates.

“In all honesty, we have not had feedback from members that the property tax climate has improved,” said Tricia Kinley, senior director of tax and regulatory reform at the Michigan Chamber of Commerce.

Adjusted for inflation, owners of commercial, industrial and utility property have enjoyed a decade-long reduction in real and personal property taxes, according to an analysis of Treasury Department data by Bridge.

Since 2001, business property taxes have fallen to an inflation-adjusted $486.8 million, a 9 percent decline. The Treasury data does not provide a breakdown of real and personal property tax revenue.

Another reason for the property tax cut has been a decline in the average millage rate statewide, from 51.41 mills in 2001 to 48.94 mills in last year.

About this project

To assess the effects of declining property values on tax collections and household budgets, Bridge Magazine took data from the Treasury Department gleaned from all ofMichigan's local governments. The result was a $1.6 billion cumulative tax cut between 2007 and 2010, adjusted to 2010 dollars.

$1.6 billion shaved off Michigan property tax bills

On the block: Taxes in Lansing, Troy, Wyoming

What was Shadow Tax Cut in your town?

Some of the property tax reduction has been a result of business bankruptcies and closings during the recent Great Recession.

In Troy, one of the largest business hubs in metro Detroit, commercial and industrial property values have fallen about 40 percent over the past five years, said city assessor Nino Licari.

That’s in part because of rising office building vacancies, including the former headquarters of Kmart Corp.

“Our biggest problem in Troy is our office market,” Licari said. “It could be 25 years before that market recovers” to its previous peak.

Business lobbying groups say changes in the state’s business tax structure will result in a hike in the personal property tax unless changes are enacted by the Legislature.

“Yes, overall some sectors during those years got tax relief,” Kinley said about the $324 million business tax cut. “But it doesn’t at all negate the need to address the personal property tax.”

Businesses are eligible for a 35 percent personal property tax credit against their Michigan Business Tax liability, but that credit disappears when the new 6 percent corporate income tax takes effect in January.

Provisions in the MBT that exempt commercial and industrial property from some school millages remain.

A new study by the Anderson Economic Group in East Lansing found that the personal property tax puts Michigan at a competitive disadvantage with a few other states, including neighboring Indiana and Ohio that don’t levy such a tax.

The study says the tax raises the cost of owning machinery and equipment in Michigan and therefore reduces a company’s return on investment. That “discourages” investment in highly mobile capital equipment in Michigan.

President Patrick Anderson said his firm conducted the study independently to provide analysis to lawmakers and Gov. Rick Snyder’s administration as they consider changes to the personal property tax.

The Michigan Municipal League and other groups are opposed to the outright elimination of the tax, saying it provides $1 billion to fund operations of financially strapped local governments.

“We should be talking about ways to make our communities stronger, not about tax cuts that will continue to push our educated workforce to other states,” said Dan Gilmartin, executive director of the Municipal League.

Anderson agreed, saying the state cannot afford to take a $1 billion tax revenue hit.

“There’s no solution where someone doesn’t have to cough up something,” said.

And although businesses may have enjoyed a personal and real property tax cut in recent years, some say those cuts will disappear as a result of an expected future rise in property values and recent tax hikes approved by voters.

“We’re not looking at this as a positive moment in Michigan’s tax environment,” McKinley said.

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William C. Plumpe
Tue, 11/29/2011 - 9:55am
On a very practical level tax cuts are good politics but not necessarily a wise policy decision. Take the personal property tax. A difficult and onerous tax but one that speaks to local control and provides some municipalities and school districts in the State with up to 60% of their operating budget. How would you replace this revenue??? By spending cuts??? You'd bankrupt any of a number of municipalities in the name of cutting taxes. That certainly doesn't seem wise or fair to me. And frankly the State does not have a good record of holding local units harmless for decreases in local revenue caused by decisions at the State level. Scale back on the personal property tax by exempting the first 10,000 in assessed and taxable value. This would eliminate 50---60% of the personal property tax accounts making administering the tax more efficient and it would give small businesses a much needed tax break.
Joan Reyes
Tue, 11/29/2011 - 10:11am
If you cut the revenue stream derived from taxing businesses, you will have to increase another group's taxes. Considering the poor job this current administration has done to attract diverse industries in this state, how much more can you increase an individual's taxes before you break that person's back. Industries in this state make billions in profits; it is time that they paid their fair share in taxes.
Tue, 11/29/2011 - 12:09pm
So from the Bridge's logic in this article I should be grateful for the property tax "cut" I received given that my taxes (property) dropped slightly because of the fact that the value of my real estate was absolutely crushed? And so if my income drops and therefore my income tax bill, does this constitute a tax cut also? It seems here that those who devised and support the loopy idea of taxation based upon some divination of real estate value or incomes are now unhappy that the pendulum swings both ways. If this is representative of the logic common in Michigan we're in for a long slow recovery. But then again judging their comments, your writers and most readers all work in the governmental sector so who cares about those nasty businesses anyway?
William C. Plumpe
Tue, 11/29/2011 - 2:26pm
Hey Matt. What's wrong with government workers??? I don't like your attitude at all that "it's our fault" or some such other feeble excuse on your part. We're all in this together or we're all apart. And remember that it was "Business People" (remember Tyco, Adelphia, K-Mart, Enron etc., etc., etc. who helped to cause the economic downturn???) And what happened to you??? did you sit on a tack or something??? Go vent somewhere else please.
Wed, 11/30/2011 - 1:35pm
Is there a guilty conscience or something here? If someone is this sensitive about their occupation maybe a change would be good. Aside from the fact that the companies you've cited are all out of the time span for this current recession, if it weren't for all these nasty private businesses (complaining about taxes), where would the rest of us work?
Kate Pohjola
Tue, 11/29/2011 - 4:47pm
The Michigan Municipal League and other groups are opposed to the outright elimination of the tax, saying it provides $1 billion to fund operations of financially strapped local governments.This is correct, though the $1B revenue estimate on the Personal Property Tax (PPT) s low. The "other groups" includes many public library systems, state-wide and any other entity (zoos, senior centers, 911 systems) that operates through special voted millages. Libraries and other special voted millages already take hits through tax capture devices (DDAs, TIF's and other authorities). The elimination of the PPT, without a replacement, would devastate many libraries to the point of closure, and leave many others hurting and having to make even more cuts to hours and services in an economy where library use is increasing daily.