Questions about Prop 1

Letter to the Editor:

On August 5, 2014, voters are being asked to approve a ballot proposal that will supposedly eliminate the collection of personal property taxes for most businesses operating in Michigan.  However, after examining the proposal, the words: personal property tax, do not even appear.

Quoting the proposal: A yes vote will reduce the state use tax and replace it with a local community stabilization share of the tax for the purpose of modernizing the tax system to help small businesses grow and create jobs in Michigan by requiring local community stabilization authorities to provide revenue to local governments dedicated to local purposes, including police, safety, fire protection, and ambulance service.

Sound confusing?

My concern with this legislation is the Local Community Stabilization Authority (LCSA) would be created by a new act (PA 86 of 2014, Senate Bill 821). The authority will be governed by a five-member council, consisting of state residents appointed by the governor, with at least three members from separate metropolitan areas of the state.

Is Mason County included in this configuration?

The use tax is a companion to the sales tax.  The use tax levied at a 6% rate on the privilege of using, storing, and consuming certain tangible personal property.  The use tax applies to remote sales, such as catalogue and internet purchases. The tax is also levied on telephone services, used cars sold between individuals, and lodging sales.

If these proposed replacement revenues do not meet the projected levels, how can the promised local distributions be delivered?  Where does this situation leave individual taxpayers?

We as homeowners and individual taxpayers have been bearing the burden of years of tax abatement grants to local businesses.  We accepted these burdens in exchange for attracting and retaining jobs and business in our state.

Along with the acceptance of these burdens caused by previous tax abatements, we have also been forced to accept increases in our personal tax liabilities through loss of tax credits such as the senior and child credits, the reduction of the homestead property tax credit, and the unprecedented taxing of our retirement pensions..

The individual taxpayers have had no choice but to accept substantially more taxes, just to maintain the current level of services.

A recent example of this problem is the current millage increase requests from 911 and LMTA agencies.

These requests are most certainly, only the beginning of a parade of millage increase requests caused by the relief of business taxes.

A recurrent reason that is used to justify Proposal 1 is to assume tax parity with other states.  The ads citing that most states do not collect personal property taxes from businesses.

While this may be true, an accurate comparison to other states cannot be made until all taxes levied by those states are compared with the entire tax package in Michigan.  Different states have different taxes.

A recent ad for Proposal 1 shows a very old machine that is still in use at a particular business.  The narrator explains that even though the original business owner paid sales tax on the machine when it was purchased, the grandson of the owner is still paying personal property taxes on the machine.

In reality, the tax paid on that machine is non-existent or near nothing due to the depreciation cycle that has long ago, usurped the taxable value of that piece of equipment.

If we followed that logic we could rightfully ask the state why we have to annually pay registration taxes on vehicles that were purchased years ago.  Does this sound fair?

Why is it that businesses always rate legislative favor over individual taxpayers?

I have obtained a nine-page copy of Proposal 1 of 2014.  Created and published by the House Fiscal Agency, it acknowledges that the result of this legislation will result in a major shift of current revenues from state budgets to local units of government in order to provide a reduction in personal property taxes paid by manufacturers, small businesses, and other commercial enterprises.

The use of these monies for local units of government, means that the revenue is not available to the state’s general fund for purposes such as health care, education, police, transportation, etc. Revenue sharing also comes from the state’s general fund.

How does the legislature know what the revenue levels will be in years to come?  Therefore, how can the proponents insure that local units of government will be “dollar for dollar” compensated for lost revenues under this new law?

If the purpose of this law is to truly attract business, perhaps the legislature should look at other reasons that Michigan has difficulty attracting new business to the state.

Transportation issues related to geography have long impacted this state’s attractiveness to business in general.  For example, the northernmost cross-state freeway is I-96, that makes it more costly to transport goods to the northern two-thirds of the state.

While we are a state blessed with many harbors, we certainly don’t utilize them for much shipping.

Our rail system has deteriorated as much as our roads in general.

Why aren’t these factors considered as valid concerns for improving business attractiveness?

A competitive business climate is not determined by taxes alone.

Constance Andersen

Former PM Township Treasurer-44yrs.