Basement Beat: Personal Property Tax replacement will go to the voters now
So, we’ve got this new website. I’m going to try and be a presence here, reporting about things I’d normally get around to in my weekly (at least in principle) column in the paper. Usually, however, a lot transpires in a week that I don’t write about. Hopefully, “Basement Beat” (a riff on my column’s name) will give me a chance to mention all of the interesting stuff I never otherwise get a chance to mention.
Questions you want me to answer here? Email me: firstname.lastname@example.org.
Replacing the PPT: Back in February, Lt. Gov. Brian Calley spoke at a Wayland Chamber of Commerce luncheon. He touted the current administration’s successes, as politicians tend to do in election years, and thanked those gathered there for their hard work during Michigan’s recovery.
Seeing an opportunity I would not often get, I cornered him and asked him when local cities would know what was going to replace the Personal Property Tax.
The tax is now in the process of being phase out. Unless that revenue is replaced, cities like Wayland would lose about $155,000 this year. Allegan would lose about $918,700.
Calley explained that some bills moving through the legislature were designed to replace most of the money. He was hopeful all of it could be replaced.
That actually came to pass yesterday.
With Gov. Snyder out of town, Calley signed the rest of that package of bills into law April 1. They are designed to “provide an estimated 100-percent reimbursement to municipalities for lost personal property tax revenue.”
That means voters will see a somewhat odd proposal on a ballot in August.
This is because the new laws propose diverting some of the state’s use tax to paying cities to replace the PPT revenue. Diverting the state’s use tax apparently requires voter approval.
The use tax, as I understand it, applied a 6-percent levy to the total price of all taxable items brought into Michigan. I had honestly never heard of it before looking into this story. It’s separate from Michiagn’s 6-percent sales tax.
The press release from Calley’s office about the bill signings leaves many questions unanswered.
Cities previously collected PPT revenue based on a percentage of the cost of things businesses buy and install in their facilities. For example, Perrigo used to have to pay the City of Allegan based on the value of the equipment in its facilities in town, like their pill-sorting machines, etc.
Now that will be phased out.
Here’s the money shuffle:
1. Voters pass the proposal.
2. The state lowers the current use tax.*
3. A new entity called the “local community stabilization authority” levies a new use tax (of the same amount as the state’s use tax was decreased, so, that’s a wash for those who pay use taxes).
4. Because that means less money for the state, it hopes to offset that through the “expiration of over $630,000,000.00 in expiring refundable tax credits that were awarded to individual businesses under tax laws enacted by past legislatures.” Somebody had to pay for it, right?
* It is, of course, not that simple. If you want your head to spin, go to www.legislature.mi.gov. Type 822 into the “Bill Number” box and press “search.” There, you can see the drafts of SB 822 as it worked its way through the legislature. Click on one of the two icons under “Senate enrolled bill” (one displays as a website, the other as a pdf file).
What you’re looking at now is the actual bill that was signed into law. Sec. 3 (5) is the breakdown of how much the new use tax will be calculated to generate for each year through 2029.
It is just one of the 11 bills used to make this whole replace-the-PPT thing happen.
And, even after all that, I’m pretty sure it will still take months or years to get a good idea of how much money cities will lose, if any.
Either way, heads up: the lynchpin of this whole complicated deal to eliminate the PPT but not totally put the screws into city revenue is a ballot proposal you’ll see in November.
I wish the state luck in boiling all of this down to a simple “yes” or “no” question.