Banking & Finance and Government

State leaders revise business property tax-cut measure

November 28, 2012
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LANSING –– Leaders from the governor's office and the Legislature on Tuesday introduced a new plan to eliminate the taxes businesses pay on computers and equipment used in the manufacturing process, but it would require voter approval.

The proposal announced by Lt. Gov. Brian Calley and lawmakers aims to repeal a tax they say hurts businesses and reduces Michigan's economic competitiveness. It also would provide more reimbursement to communities for lost revenues than in a measure passed in May by the Senate.

The new measure would reimburse all of the money lost for emergency services such as police and fire and 80 percent of the money for other municipal services. Reimbursement money would come from part of an existing tax paid on out-of-state purchases, and the money the state loses from that diversion would come from expiring business tax credits for battery manufacturers and other companies.

The rollback of the tax is expected to amount to $600 million annually once fully implemented in about a decade, and reimbursements to local governments would total about $500 million.

The proposal would require voter approval - possibly in the 2014 primary or general election - if the Legislature passes it. Calley said he's hopeful the Senate and House will vote on the revised proposal by the end of the year.

Local governments also can assess a special assessment on the property of the exempt taxpayers to replace the revenue that otherwise would have paid for emergency services.

The proposal is the latest business-friendly tax restructuring effort sought by Gov. Rick Snyder, who worked with lawmakers last year to eliminate the Michigan Business Tax and replace it with a 6 percent corporate income tax that two-thirds of businesses don't have to pay.

Leaders billed it as a bipartisan compromise, with some Democratic lawmakers joining their GOP counterparts in the majority in crafting and announcing the e revision. But the legislation still raises concerns for other lawmakers and a coalition of groups dubbed "Replace Don't Erase" that includes the Michigan Municipal League and Michigan Association of Counties.

Although the coalition says the legislation represents a "major improvement" over the bill package passed by the Senate, its members would like more time to get a full understanding of it and the effect it would have on taxpayers as well as local and state governments.

Still, the proposal is good news to manufacturers such as Dearborn-based Ford Motor Co. and has even garnered the support several of the state's organizations representing police and firefighters.

The proposed phase out of the industrial personal property tax will attract investment and create jobs, said Mike Johnston, vice president of Government Affairs for the Michigan Manufacturers Association.

"The tax discourages manufacturers from investing in new equipment essential to productivity y and growth, therefore significantly limiting their ability to create new jobs," Johnston said. "Almost all of our neighboring states have already eliminated this tax, putting Michigan at a competitive disadvantage."

Dearborn Mayor Jack O'Reilly, who has worked to solve tax disputes with Ford officials, said it's not a perfect proposal but provides more predictability and reliability than revenues from the existing personal property tax, which has significantly declined in the city during the past few years.

"This is something we're comfortable with," he said.

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