Accelerated Tax Breaks Sought
SBAM reports that it has asked the Michigan Senate and House of Representatives to provide immediate implementation of a $10,000 personal property tax exemption.
Earlier this year the House Tax Committee adopted a three-year phase-in of the exemption.
SBAM’s vice president for government relations, Barry Cargill, said the rationale for the request is that start-ups — some of them likely founded by people laid off from corporate positions — need the break because they have the potential to provide meaningful new employment.
He also urged lawmakers to go a step further and exempt small firms with less than $10,000 in personal property from even filing a personal property tax report.
“Relieving this reporting requirement,” Cargill said, “would be a tremendous boost for small start-ups and would eliminate an important barrier of bureaucratic red tape.”
It was his contention that the cost of personal property tax compliance is so onerous that an exemption threshold of $100,000 is clearly warranted.
“However, we appreciate that even a $10,000 threshold is a step in the right direction and an important economic strategy — provided that small business start-ups don’t have to endure a three-year phase-in period.”
Many people on Cargill’s side of the argument note that most of today’s multinational corporations started as small businesses, too … but in an era when they had to shoulder few regulatory burdens and few taxes.
Cargill admitted that scrapping the exemption’s phase-in for one-person firms or firms with very small payrolls would have a price for municipalities and schools.
He also believes it would pay off for those governments.
“While we recognize that local units of government are impacted by personal property tax exemptions, the short-term pain is an appropriate trade-off to help encourage the entrepreneurial energies that may someday result in a new Microsoft, Intel or Electrolux.”
Local governments that have been critical of eliminating the personal property tax on new small businesses need to think their position through, said Cargill.
“Look at how many local municipalities complain, on the one hand,” he said, “about a lack of local revenues, and then — on the other — enact so-called living wage ordinances that increase the cost of city and municipal services.”
He said that SBAM doesn’t believe that exempting very small businesses from filing personal property tax returns will be a net revenue loser for municipalities.
Cargill added that he believes it’s time local officials realized they are not the ones creating jobs or, as businesses grow, amassing the inventory that generates local personal property tax revenue for cities, counties and schools.
“Businesses do that,” he said, adding that tax collectors are making growth very difficult right now for small businesses.
“The purpose of local government is not simply to collect and spend as much revenue as they can,” he said. “The world does not revolve around local governments.”