Proposal 1 would replace lost money for communities
Local governments have been concerned about how they will recoup the revenue lost from the abolishment of Personal Property Tax on some businesses. At the same time businesses that are now enjoying the tax relief are able to invest on new machines, technology and equipment and not have the burden of being taxed twice for it.
In order to make both local governments and the private sector happy, the state legislature drafted Proposal 1, which would reduce the state’s “use” tax and establish a community stabilization share that would be distributed to local government units to replace the lost money from personal property tax. It does not raise taxes on residents, but increases a portion of the use tax dedicated to aid local schools. The money also will provide money local government can use on police, fire and ambulance services.
Truscott Rossman CEO Kelly Rossman-McKinney said the proposal is the only state initiative on the Aug. 5 ballot, but it carries a lot of weight on how local governments will be able to operate in the years moving ahead. She said the bill is widely supported by both private and public groups and can solve two problems at the same time.
Rossman-McKinney said it is important to educate people on what personal property tax is because many people think it is a tax all residents pay, but in fact it is only levied against businesses.
“Proposal 1 takes care of two problems. First off it gets rid of the unfair double tax for small businesses and manufacturers, but replaces the revenue for cities, counties and townships,” Rossman-McKinney said. “By voting yes, the voter is voting that they do want the revenue to their local government replaced at 100 percent of their estimated loss. It makes them whole from losing the personal property tax revenue.”
Alpena City Manager Greg Sundin said the loss of personal property tax would equate to between $650,000 and $700,000 if the state is not able to reimburse it. He said that it is 14 percent of the general fund and if the revenue is not made up, lots of changes would have to be made. Sundin said he cannot advocate on how to vote, but the idea could lessen the strain on losing so much money.
“I do believe what they have come up with is probably the best alternative and probably the best we are going to get out of the legislature or the governor’s office,” Sundin said. “Right now our budget assumes we are gong to get this, but if not, then there will be cuts and we have already cut to the bone, and if we have to go into the bone, it will have serious impacts on city operations.”
From a business standpoint the removal of personal property tax allows companies to expand businesses and upgrade equipment and not have to worry about paying taxes on the initial purchase, and then be taxed again afterward. Lafarge Presque Isle Plant Manager Allan Idalski said by eliminating or reducing personal property tax, it allows the company to set prices with similar businesses that operate in states that do not have personal property tax obligations. He said by being more competitive on the global marker, it also allows the plant to expand and hire workers.
“It gives the companies in surrounding states that don’t have the tax an advantage over us,” Idalski said. “If we can do without it, it helps us be more competitive and to be able to stay in the community as we are now and continue to be a huge supporter of it. We want to see the local governments become whole because they provide the services our workers depend on.”
Alpena Township Supervisor Marie Twite said the township would lose about $37,000 from its budget from the loss of personal property tax. She said the township already is limited in what it can do with the money it has and any additional money will benefit the residents.
“We have had to tighten our belt and work with other communities to try to cut cost, but we can’t go out and ask the citizens to pay more in taxes,”Twite said. “If Proposal 1 will make our budget whole and we get the money back we lost, then we won’t have to do that as much and be able to provide for our residents the way they expect.”
Rossman-McKinney said the removal of personal property tax should result in $450 million in new investment in the state and add 15,000 to the workforce. She said the bill is supported by Michigan AARP, Michigan Professional Firefighters Union, the Michigan Community College Association, Michigan Association of Chiefs of Police, the Michigan Municipal League and many others.
“In all of my years I have not see a proposition supported by so many,” Rossman-McKinney said. “There really hasn’t been anyone opposed to it, but we need to continue to educate the public so they understand the vote and what it will do for their local government and for growth in Michigan.”