Personal Property Tax Phase-Out Matters For Michigan

An eight-bill package has started moving through the legislature that would phase-out the person property tax, which affects business tools and equipment and is viewed by some as a detriment to doing business.

“The legislature found a way to wind down a tax that is, dollar-for-dollar, the most economically destructive in the state,” said James Hohman, assistant director of fiscal policy at the Mackinac Center for Public Policy.

Michigan's personal property tax is a tax mostly on assets such as furniture, fixtures, machinery, equipment, leasehold improvements and electrical and gas transmission and distribution infrastructure.

Gov. Rick Snyder proposed eliminating the tax before he was elected and said he views the PPT as an obstacle to attracting reinvestment and new investment to Michigan. Larger businesses are generally most often affected by the personal property tax, which provides significant revenue to some local communities in the state.

The plan to eliminate the personal property tax calls for the creation of a fund to reimburse local entities for a portion of the lost revenue. Replacement funds would come from dollars freed up by the expiration of business tax credits.

Under the legislation, the phase-out would begin at the end of 2012, by exempting all commercial and industrial personal property if the combined taxable value was less than $40,000 in the local tax collecting unit. At the end of 2015 an exemption would go into effect for manufacturing personal property purchased after 2011. By 2022, the PPT would be completely eliminated.

Language was added to the legislation on the Senate floor that said if the state failed to come up with replacement revenue, the PPT would stay in place. It is estimated that the tax revenue generated by all forms of the PPT total between $1.2 billion and $1.3 billion.

The Michigan Municipal League, which is opposed to the elimination of the tax, did not respond to a phone call for comment.