PPT won't disappear with a 'yes' vote
Some businesses will be free of the personal property tax but not others.
One fact about Michigan’s personal property tax on business equipment is apparently overlooked in the blizzard of support for Proposal 1 on the Aug. 5 ballot.
Proposal 1 will establish other sources of tax revenue to replace the PPT, which has long been crucial funding for many county and municipal governments around the state. But it will not end the PPT on businesses with personal property values totaling $80,000 or more, or for utility companies.
If Proposal 1 passes, businesses with personal property values less than $80,000 will be exempt from the PPT, and a gradual phase-out of the tax on industrial plants will begin, lasting several years.
A “yes” vote Aug. 5 may pave the way for a campaign to end the PPT for all business in Michigan, although two major PPT payers in the Grand Rapids region ducked speculation about its future when contacted by the Business Journal.
Tom Scott of the Michigan Retailers Association said that organization is “part of the broad coalition actively supporting Proposal 1” because it “solves two problems without increasing taxes on anyone. The personal property tax proposal provides important tax relief to small business and stabilizes communities by providing dedicated funding for local services.”
Scott said the retailers association “also supported the measure in the legislature because it was the best available solution to providing additional business tax reform. In a perfect world, personal property tax relief also would extend to large commercial enterprises. But we live in a world of balanced budgets, legislative compromise and achieving what’s possible — and this was the best solution that was possible.
“Even so, it will benefit some 90 percent of Michigan’s retail industry, which is a major achievement. And, as Michigan’s economy continues to improve, it could lead to repeal or reduction of the personal property tax on large retail companies in the future.”
Michigan businesses and their associations say the tax is unfair because it taxes machinery, equipment and furnishings for as long as the property is still in use. It is particularly expensive at industrial sites because some high-tech manufacturing machinery costs millions of dollars in the first place. It is then taxed on its depreciated value every year thereafter, although the tax never totally goes away.
For example, Hansen-Balk, a steel-treating business on Monroe Avenue in Grand Rapids, has an industrial furnace that has been taxed under the PPT every year since 1959.
Other types of businesses also have extensive investments in personal property, such as Meijer Inc. According to city of Grand Rapids tax records, the 2014 summer tax bill for personal property owned by the retailer at 1997 East Beltline Ave. NE — the Knapp’s Corner store — is $203,409.
Consumers Energy is the largest single property tax payer in Grand Rapids. Tax records show that the summer 2014 tax bill on personal property for just one of its six personal property parcels in Grand Rapids is more than $2.4 million. Another parcel has a tax bill of roughly $695,000.
The Business Journal asked Consumers Energy: If voters approve Proposal 1, would the utility then push for repeal of the PPT on utilities?
“We’re going to decline to speculate on what might happen after Aug. 5,” replied spokesperson Brian M. Wheeler.
Meijer Inc. was asked essentially the same question.
“Meijer enthusiastically supports a Yes vote on Proposition 1,” replied Stacie Behler, vice president of public affairs and communications at Meijer. “The balance of stable funding for our local communities while being able to reduce the tax burden on small business in Michigan is an important step forward for the state.”
“As we continue to say, policies and an environment that keeps Michigan heading toward a state with 12 million people is a very good thing for Meijer,” added Behler. “Reduction in the personal property tax makes our state competitive with others and helps attract or retain businesses to our state. That means more jobs and more income for people in Michigan.”