Government and Small Business & Startups

SBAM supports full replacement of PPT revenue for local governments

February 28, 2014
| By Pete Daly |
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The Small Business Association of Michigan has come out in wholehearted support of the Snyder Administration’s proposed legislation that would guarantee a 100 percent replacement of the funding the personal property tax on business equipment provided to local governments.

Businesses throughout the state want the PPT on manufacturing and small businesses ended, and people who want to make Michigan more competitive in attracting new business also want it gone, but the original PPT reform passed by the Legislature in 2012 didn’t offer a 100 percent funding replacement for the local governments — and they objected.

Tentative phase-out of the PPT began this year, with small businesses having less than $80,000 worth of personal property able to file for an exemption in 2014.

If the ballot proposal at the Aug. 5 state primary election is approved by voters, it would begin the phase-out over several years of the annual personal property tax on manufacturing, which pays the most because of the cost of machinery. It would also abolish the PPT on small business permanently, immediately. However, regardless of the Aug. 5 vote, there will continue to be a PPT on commercial businesses with more than $80,000 worth of taxable personal property.

The ballot proposal also would change the state tax policy, allowing the state to funnel some of its use tax revenues to fund local government services.

According to the Michigan government website, both individuals and businessesmust pay a 6 percent tax on tangible personal property when Michigan sales tax was not charged on that purchase. It covers all taxable items brought into Michigan, or purchases by mail from out-of-state retailers.

Some cities that depend significantly on the PPT, like Holland, would not support passage of the PPT phase-out without a full replacement of the funding it would lose. Holland receives about 24 percent of its funding for municipal services from the PPT.

Michigan Lt. Gov. Brian Calley said last week Michigan will be able to fully reimburse local governments through savings expected to begin in 2016 due to the expiration of annual tax credits formerly used to lure new factories and businesses to Michigan.

At SBAM headquarters in Lansing last week, business and local government representatives promoted their joint support for Snyder’s proposed legislation.

“For the first time in more than a century, the vast majority of Michigan's small businesses did not have to pay a tax on their equipment this year,” said Chad Paalman, president of NuWave Technology Partners, a Michigan-based IT company.

Paalman, who is a member of the SBAM board of directors, added, “At the same time we are getting this long-overdue tax reform, it is important to us that our communities are made whole. The bills being introduced today do just that, and we are grateful to our legislators for expediting these important reforms.”

According to SBAM, the bipartisan Personal Property Tax Relief and Local Revenue Stabilization Package provides local governments with stable, reliable funding for all local services, not just essential services such as police and fire. The 10-bill package addresses local government concerns that only 80 percent of some important local services would be fully reimbursed under the 2012 PPT reform. It clarifies the landmark legislation passed in December 2012 to modernize Michigan’s outdated business tax code by specifying that all local services will be reimbursed at 100 percent. The current 2012 law calls for 100 percent reimbursement for essential services and 80 percent for other local services.

SBAM and the other supporters of the package hope to win legislative approval of Snyder’s proposal before the spring recess, to make sure the language can be changed in time for the Aug. 5 ballot.

The Michigan Association of Counties issued a statement Feb. 25, thanking the Snyder administration and key legislators in the House and Senate for their proposed changes to PPT reforms — particularly, the 100 percent reimbursement to counties stemming from local revenue losses associated with reform of the PPT.

The Michigan Municipal League also issued a statement, noting that, for the past 15 months, it had been working at the state level to work through the “many issues with the package, both technical and substantive policy issues.” On Feb. 25, it said the package submitted to the legislature is a “League victory.”

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