Lawmakers find compromise, pass repeal of personal property tax

Dec 14, 2012

Legislation that will eliminate several hundred million dollars in taxes that businesses pay each year on equipment awaits Governor Rick Snyder’s signature. Michigan’s personal property tax applies to all kinds of things; car makers pay the tax on heavy machinery, restaurants pay it on new ovens and dishwashers.

The legislature voted early Friday morning to repeal the personal property tax and replace up to 80-percent of the lost revenue to local governments where the loss makes up more than 2.3-percent of the total tax revenue.

Local governments love the money they get from the tax, but it’s also complicated to administer.

Samantha Harkins is with the Michigan Municipal League, which initially opposed the repeal because so many cities would lose so much revenue. She says the league ended up taking a neutral position because now the repeal depends on voters replacing some of the revenue that local governments will lose.

“We felt like that gave us more of a guarantee and allowed us to have time to work through any of the remaining issues,” Harkins said.

Holland Mayor Kurt Dykstra is also pleased some of the revenue will be replaced. It represents about 13-percent of the city’s revenue.

“Sure we’ll take somewhat of a hit in local government. But it’s a hit that I think by and large will be manageable and it’s not a catastrophic sort of hit that could’ve been the case,” Dykstra said.

Dykstra and Harkins had more confidence in the bills once they were tied to a revenue source that did not depend on lawmakers acting in the future. Especially because the repeal will only happen if voters agree to divert revenue from another state tax, the use tax. That election is set for August 2014.

Under the legislation, local governments could also charge businesses a special fee to pay for public safety services.

The bills’ supporters say repealing the personal property tax will be good for businesses.