Michigan Use Tax and Community Stabilization Share, Proposal 1 (August 2014)
|Referred by:||Michigan Legislature|
|Topic:||Taxes on the ballot|
|Status:||On the ballot|
- 1 Text of measure
- 2 Background
- 3 Support
- 4 Opposition
- 5 Media editorial positions
- 6 Path to the ballot
- 7 See also
- 8 External links
- 9 References
The Michigan Use Tax and Community Stabilization Share, Proposal 1 is on the August 5, 2014 ballot in Michigan as a legislatively-referred state statute. The measure, upon voter approval, would activate a package of legislatively approved bills that would do the following:
- Phase out the Personal Property Tax or PPT on all industrial personal property and a portion of commercial personal property.
- Split the State Use Tax into two taxes, the State Share Tax and a Local Community Stabilization Share Tax.
- Create a Local Community Stabilization Authority to administer the Local Community Stabilization Share Tax.
- Replace the revenue local governments would lose without the PPT with revenue from the Local Community Stabilization Share Tax.
The “Personal Property Tax” (PPT) has been described as having a “misleading name” and being "an inaccurately named levy" because the tax is not levied on an individual's personal property, as the tax's name would suggest. The PPT is an annual business tax levied on productive business assets, such as equipment and machinery, and other property, including furniture, display racks, computers, shelving and so on. Proposal 1 would phase out the tax on all industrial personal property and a portion of commercial personal property by 2023. Businesses with total personal property valued at or below $80,000 would be able to file for exemption from the PPT immediately, rather than waiting for the phase out to be completed. Some municipalities rely heavily on revenue from the PPT.
The measure would replace the revenue local governments would lose without the PPT with revenue from a Local Community Stabilization Share Tax. The new tax would be created by splitting the state's current use tax into two taxes - (1) a Local Community Stabilization Share Tax and (2) a State Share Tax. The state use tax is levied at a rate of 6 percent and the two new share taxes would be levied at a combined rate of 6 percent. Therefore, there would be no tax increase under Proposal 1.
The State Share Tax would be administered by the state, while the Local Community Stabilization Share Tax would be administered by a Local Community Stabilization Authority. The authority would receive revenue from the tax and distribute such to local governments. Revenue would be distributed for the purposes of funding school districts, fire protection, police officers and emergency services.
The local community stabilization share tax rate would be determined annually by the Michigan Department of Treasury. The department would calculate the rate based on revenue targets. The following are the revenue targets laid out by Proposal 1:
Since the local community stabilization share tax and state share tax cannot exceed a combined rate of 6 percent, the state share tax rate would follow a simple formula:
|State share tax rate = 6 percent - local community stabilization share tax rate.|
Proposal 1 was forced onto the ballot by Section 31 of Article IX of the Michigan Constitution, which requires voter approval for any new taxes levied by local governments. The Local Community Stabilization Authority, the proposed body that would administer the tax, is classified as a "local unit of government."
If approved, the proposal would take effect on January 1, 2015.
There is no organized opposition to Proposal 1. Nonetheless, proponents have expressed concern that the proposal may be defeated anyway due to “the complexity of the issue” and the ballot measure's "virtually incomprehensible" language.
Text of measure
The official ballot text reads as follows:
|“|| APPROVAL OR DISAPPROVAL OF AMENDATORY ACT TO REDUCE STATE USE TAX AND REPLACE WITH A LOCAL COMMUNITY STABILIZATION SHARE TO MODERNIZE THE TAX SYSTEM TO HELP SMALL BUSINESSES GROW AND CREATE JOBS
The amendatory act adopted by the Legislature would:
Should this law be approved?
Use tax history
Michigan's use tax was adopted in 1937 via Public Act 94 at a rate of 3 percent. The use tax rate was increased by law to 4 percent in 1960. In 1994, voters approved Proposal A, a legislatively-referred constitutional amendment which increased the use tax rate to 6 percent. The 2 percent increase was put in Section 8 of Article IX of the Michigan Constitution. Therefore, the use tax, unless the constitution is changed, must be at a rate of at least 2 percent. That 2 percent is deposited into the state school fund. The rest of the tax is deposited into the school aid fund in an amount equal to revenue lost from tax exemptions implemented in 2014. Proposal 1 reorganizes the use tax into the State Share Tax and Local Community Stabilization Share Tax.
The following graph illustrates use tax revenues in Michigan from 1938 to 2012:
PPT cut of 2012
In 2012, Gov. Rick Snyder (R) signed legislation to phase out the PPT, but the legislation did not provide municipalities with any alternative source of revenues. Warren's budget, for example, was 15.25 percent comprised of revenues from the tax and River Rouge's was even higher at 56.8 percent. Proposal 1 is intended to alleviate municipal budget problems arising from the tax phase out.
If Proposal 1 is defeated, the entire PPT phase out will be halted.
Proposal 1 is part of a “bill package” made up of ten bills: Senate Bills 821, 822, 823, 824, 825, 826, 827, 828, 829 and 830. Together the ten bills will continue to phase out the personal property tax on business - a tax on business equipment and furniture - while guaranteeing reimbursement for local governments who rely on revenue from such tax to provide local services, including fire fighters and police officers. SB 825 was an alternative ballot question to SB 822, but became defunct with the legislature's enactment of SB 822. All the bills, except SB 823, will not go into effect unless voters approve SB 822 in August. SB 823 will only partially go into effect without the approval of SB 822.
Citizens for Strong and Safe Communities is leading the campaign in support of the measure.
Other officials who support the measure include:
- Former Attorney General Frank Kelley (D)
- Tom Watkins, former superintendent of public instruction
- Michigan Municipal League
- Michigan Association of Counties
- Michigan Townships Association
- Michigan League for Public Policy
- West Michigan Policy Forum
- Michigan Farm Bureau
- Michigan AARP
- Michigan Association of School Administrators
- Michigan Association of School Boards
- Michigan Community College Association
- Michigan Library Association
- Michigan Sheriff's Association
- Michigan Association of Chiefs of Police
- Police Officers Association of Michigan
- Fraternal Order of Police
- Michigan Association of Fire Chiefs
- Michigan Professional Fire Fighters Union
- Michigan Food & Beverage Association
- Michigan Restaurant Association
- Michigan Grocers Association
- Michigan Soft Drink Association
- Michigan Retailers Association
- Michigan Infrastructure & Transportation Association
- Associated Petroleum Industries of Michigan
- Michigan Concrete Association
- Business Leaders for Michigan
- Michigan Business & Professional Association
- National Federation of Independent Business – Michigan
- Michigan Association of Realtors
- Great Lakes Bay Manufacturers Association
- Lake Superior Community Partnership
Chambers of Commerce
- Michigan Chamber of Commerce
- Alpena Area Chamber of Commerce
- Ann Arbor/Ypsilanti (A2Y) Regional Chamber
- Battle Creek Area Chamber of Commerce
- Berrien County Manufacturers Council
- Blue Water Area Chamber of Commerce
- Detroit Regional Chamber
- Flint & Genesee Chamber of Commerce
- Grand Blanc Chamber of Commerce
- Grand Rapids Area Chamber of Commerce
- Howell Area Chamber of Commerce
- Hudsonville Area Chamber of Commerce
- Jackson County Chamber of Commerce
- Lansing Regional Chamber of Commerce
- Livonia Chamber of Commerce
- Ludington & Scottville Area Chamber of Commerce
- Michigan West Coast Chamber of Commerce
- Northern Michigan Chamber Alliance
- Petoskey Regional Chamber of Commerce
- Plymouth Community Chamber of Commerce
- Saginaw County Chamber of Commerce
- Traverse City Area Chamber of Commerce
- Waterford Area Chamber of Commerce
A Citizens for Strong and Safe Communities’ campaign video titled “Jobs.”
Citizens for Strong and Safe Communities broke down their argument in support of the proposal into a section on "the problem" and a section on "the solution." The following is an excerpt from their analysis of "the problem:"
The problem for local communities: Michigan communities have struggled for years to pay for essential services like police, fire, ambulances, schools, roads and jails. Communities also battle for annual legislative appropriations in Lansing to fund other services, including roads and libraries, through revenue sharing.
How it's collected: Currently, the personal property tax is collected by local municipalities according to local millage rates. This means businesses with multiple locations in multiple jurisdictions pay multiple personal property tax bills at varying rates. For some smaller municipalities, the cost of assessing and collecting this tax is almost more than they collect.
Double-taxing small businesses: For decades, Michigan has unfairly double-taxed small businesses with a business equipment tax – known as the personal property tax – on all equipment. Most neighboring states don’t tax business equipment at all, which makes Michigan much less competitive when it comes to creating jobs and attracting business investment.
A tax that never goes away: Each year, equipment is assessed a taxable value and the owner pays a tax based on the local millage rate. In addition to the 6 percent sales tax paid for most items purchased or sold in Michigan, small businesses pay additional personal property taxes on that equipment every single year just for owning it – that tax never goes away, no matter how old the equipment is.
An antiquated, obsolete tax: This antiquated, double-tax has been on the books since the 1800s. Other states in our region have eliminated these antiquated taxes or have dramatically lowered rates, making it difficult for Michigan to compete.
This tax limits investment: Only businesses, including small businesses, pay personal property taxes on their equipment. Taxes on business capital are considered by economists to limit investment, making Michigan less competitive than other states.
Reforming this tax will create jobs and increase investment: Eliminating the Personal Property Tax will create up to 15,000 jobs and $450 million in additional investment. In fact, no other state in our region taxes business equipment the way Michigan does – and no state except one in our region taxes it at all, which puts Michigan at a competitive disadvantage when it comes to job creation and business investment. 
—Citizens for Strong and Safe Communities, 
A Citizens for Strong and Safe Communities’ campaign video titled “Hurts.”
The following is an excerpt from their analysis of "the solution:"
Stabilizing Services In Your Community: Proposal 1 creates a stable, reliable funding system for communities in Michigan to pay for police, fire, ambulances, jails, senior services, schools, libraries, roads and other community services.
Local Control Guarantees: Proposal 1 comes with two guarantees: 100 percent of the funding for local community services will be returned directly to your community for police, fire, senior services, ambulances, jails, schools, roads, libraries and other community services.
No More Playing Politics With Local Communities: 100 percent of this dedicated funding for local community services is no longer subject to the uncertainty and instability of annual legislative appropriations or political gamesmanship in Lansing.
Gives small businesses a fighting chance: Proposal 1 ends the unfair double tax on small businesses to give them a fighting chance and help them create more jobs. It keeps in place the legislature’ work to end this unfair double tax on personal property.
No tax increase - for anybody!: Proposal 1 doesn’t raise tax rates. Instead, it is paid for by eliminating special corporate tax loopholes that the legislature has already voted to end, and by establishing a statewide Essential Services Assessment that is only paid for by manufacturers that receive a Personal Property Tax reduction.
Small businesses are already seeing benefits: Small businesses stopped paying the double tax on personal property effective January 2014. Manufacturing businesses, large and small, will see this antiquated uncompetitive tax phased out over time, beginning in 2016.
Proposal 1 will create jobs and boost investment in Michigan: The U.S. Small Business Administration found that nearly two-thirds of net new jobs over the past 15 years were created by small businesses. Personal Property Tax reform will free up money that can be used for job growth. Eliminating the Personal Property Tax will create up to 15,000 jobs and $450 million in additional investment.
Proposal 1 creates an environment for economic growth: Finally, Proposal 1 won’t increase taxes. Instead, it will create an environment that attracts employers to Michigan while ensuring important local services are protected with stable funding sources. 
—Citizens for Strong and Safe Communities, 
A Citizens for Strong and Safe Communities’ campaign video titled “Facts.”
Tom Watkins, who served as the Michigan Superintendent of Public Instruction from 2001 to 2005, deemed Proposal 1 a “win-win-win.” He listed several reasons to support the ballot measure:
—Tom Watkins, 
Other arguments in favor of the proposal include:
- Speaker of the House Jase Bolger (R-63) said, “We are getting rid of a job-killing tax and replacing it with a job-creating solution. For years, our state lost out on jobs to neighboring states that do not punish their employers for investing in new equipment. Well, today those states no longer have that advantage and will have a front-row seat to watch as Michigan attracts new and better careers.”
- Sen. Rebekah Warren (D-18) stated, "We finally got it right. You will see, I think, a lot of broad bipartisan support. We can both modernize our tax structure and make sure our local communities have a stable revenue stream long into the future."
- Macomb County Executive Mark Hackel (D) concluded, "A yes vote for Proposal 1 solves two major problems for Michigan and Macomb County without raising taxes. Proposal 1 replaces 100 percent of the estimated revenues lost by eliminating the Personal Property Tax for important services like police, fire, schools, ambulances, roads, jails and libraries. Second, a yes vote on Proposal 1 supports local small businesses and manufacturers by reforming the uncompetitive Personal Property Tax."
- Amy Clickner, CEO of Lake Superior Community Partnership, said, “As an economic development organization, we see the value in eliminating the cumbersome tax and believe it will be especially positive for small business. However, we were not willing to support the tax elimination if it meant a negative financial impact to our local municipalities, which has been corrected in the passed legislation.”
| Total campaign cash |
as of July 15, 2014
As of July 15, 2014, the Citizens for Strong and Safe Communities committee has received $5,730,310 in contributions.
|PAC||Amount raised||Amount spent|
|Citizens for Strong and Safe Communities||$5,730,310||$418,882|
Top 6 contributors:
|Ford Motor Company||$2,000,000|
|Michigan Manufacturers Association||$1,568,415|
|DTE Energy Co.||$50,000|
The proposal is not expected to face organized opposition.
- Note: Sen. Whitmer opposed the bill in the legislature, but came out in support of the proposal in July 2014.
- Sen. Gretchen Whitmer (D-23) said she was concerned that the state would lose too much tax revenue. She argued, “Where is that shortfall going to come from? There’s a likelihood that it will come from the same groups that are applauding the fact that now it will make them whole.” Sen. Whitmer later reversed her position, saying, "The Senate bill to put this proposal on the ballot left large questions that I felt needed to be answered, particularly addressing the potential financial impacts on local schools and first responders. With the improvements that were made to this proposal in the State House and subsequent analysis by local government officials and fiscal agencies, I am comfortable that my concerns have been addressed and that this move won’t put our local communities at further financial risk."
Media editorial positions
- Crain's Detroit Business said, "The PPT has been unpopular for a long time. Businesses don't like it because it's hard to figure out and it's not charged by most nearby states. Local governments haven't liked it because the assessments are constantly under appeal by businesses. The current proposal addresses the concerns of both businesses and municipalities and doesn't raise anyone's taxes."
- Detroit Free Press said, "Ultimately, if voters don’t approve Prop 1, the personal property tax will go back into effect, along with the bureaucratic mess it causes businesses and cities... We haven’t always agreed with [Gov. Snyder's] decisions, but on this one, we’re all in. Municipalities need steady funding; both businesses and municipalities need less overhead in the taxation process. Take the time to read the ballot language, and information about the tax replacement, and vote yes on Aug. 5."
- Gannett Company, owner of Observer & Eccentric, Battle Creek Enquirer and Livingston Daily, said, "A proposal that helps Michigan businesses without hurting local governments and schools is a good deal for everyone, including homeowners. That’s why voters should support Proposal 1 during the Aug. 5 state primary."
- Holland Sentinel said, "Proposal 1 may sound like a technical, inside-government issue, but it’s important to everyone in Michigan. It is a rare and gratifying example of legislators addressing a real problem and working together to fix it."
- Lansing State Journal said, "It is a rare occurrence in Michigan when a reform effort wins broad support from a coalition that draws large and small business, labor, government, Democrats and Republicans. Yet that’s what has happened with Proposal 1, a statewide question that will appear on the Aug. 5 primary ballot."
Path to the ballot
A simple legislative majority was needed to refer the statute to the ballot. SB 822 was approved by the Michigan House of Representatives on March 25, 2014. The bill was approved by the Michigan Senate on March 27, 2014. The act was signed by the governor on March 28, 2014.
March 25, 2014 House vote
|Michigan SB 822 House Vote|
March 27, 2014 Senate vote
|Michigan SB 822 Senate Vote|
- Senate Bill No. 822
- Summary of Use Tax by Michigan Department of Tresury
- Citizens Research Council of Michigan, "Outline of the Michigan Tax System," April 2014
- Citizens for Strong & Safe Communities
- Citizens for Strong & Safe Communities Facebook
- Citizens for Strong & Safe Communities Twitter
- Citizens Research Council of Michigan, "Statewide Ballot Issues: Proposal 2014-1," accessed July 15, 2014
- Michigan Radio, "This ballot proposal is critical to Michigan's economy, but most people won't bother to vote on it," July 15, 2014
- Holland Sentinel, "Our View: Proposal 1 is a good deal for everyone in Michigan," July 6, 2014
- City of East Lansing, "Business Personal Property Tax," accessed July 15, 2014
- Michigan Legislature, "Enrolled Senate Bill No. 822," accessed March 28, 2014
- Michigan Department of Treasury, "Use Tax," accessed July 2, 2014
- Citizens Research Council of Michigan, "Outline of the Michigan Tax System," April 2014
- Note: This text is quoted verbatim from the original source. Any inconsistencies are attributed to the original source.
- MLive, "Personal property tax ballot proposal won't face opposition, so why do supporters still fear failure?," May 30, 2014
- The Republic, "Michigan Legislature sends Snyder bills ensuring municipalities not harmed by business tax cut," March 27, 2014
- Detroit Free Press, "Michigan Senate OKs plan to eliminate personal property tax," March 4, 2014
- MLive, "Gov. Snyder signs law repealing taxes on industrial business equipment; vote to be held in 2014," December 20, 2012
- Lansing State Journal, "Michigan legislature passes bills eliminating personal property tax for business," March 27, 2014
- Michigan Legislature, "Enrolled Senate Bill No. 825," accessed March 28, 2014
- Citizens for Strong and Safe Communities, "Homepage," accessed July 1, 2014
- MLive, "Michigan House moves to repeal 'job-killing' personal property tax, replace local revenue," March 25, 2014
- Battle Creek Enquirer, "Michigan Citizens for Strong & Safe Communities: Proposal 1 puts Michigan on the right track," July 11, 2014
- MLive, "Michigan personal property tax reform plan hailed as 'win-win' for businesses, local governments," February 25, 2014
- Citizens for Strong and Safe Communities, "Former Attorney General Frank Kelley endorses Aug. 5 ballot proposal," May 15, 2014
- Dome Magazine, "Strong Schools Require a “Yes” Vote on Proposal 1!," July 4, 2014
- Michigan Municipal Leauge, "Frankenmuth Resolution," June 3, 2014
- Michigan Municipal Leauge, "Fremont Resolution," May 19, 2014
- Michigan Municipal Leauge, "Grayling Resolution," May 12, 2014
- Michigan Municipal Leauge, "Hartford Resolution," May 19, 2014
- MLive, "Resolution supporting elimination of Personal Property Tax OK'd by Kalamazoo City Commission," July 8, 2014
- Michigan Municipal Leauge, "Madison Heights Resolution," May 27, 2014
- Michigan Municipal Leauge, "Mattawan Resolution," May 12, 2014
- Michigan Municipal Leauge, "Middleville Resolution," June 10, 2014
- Michigan Municipal Leauge, "Mount Pleasant Resolution," June 9, 2014
- Michigan Municipal Leauge, "Northville Resolution," May 22, 2014
- Michigan Municipal Leauge, "Norton Shores Resolution," May 20, 2014
- Michigan Municipal Leauge, "Pleasant Ridge Resolution," June 10, 2014
- Michigan Municipal Leauge, "Walker Resolution," June 9, 2014
- Michigan Municipal Leauge, "Yale Resolution," June 9, 2014
- Michigan Municipal League, "Michigan Communities Urge Residents to Vote YES on Proposal 1; Pass Resolutions in Support," June 26, 2014
- Citizens for Strong and Safe Communities, "Supporters," accessed July 1, 2014
- Michigan Farm Bureau, "Ballot Initiatives," accessed July 1, 2014
- WKZO, "Michigan AARP supports ballot proposal to eliminate state personal property tax," June 17, 2014
- Midland Daily News, "Michigan Sheriff's Association backs Proposal 1, which would benefit Midland, Midland County," June 25, 2014
- The Mining Journal, "LSCP backs proposal to eliminate personal property tax," April 15, 2014
- Livingston Daily, "Howell chamber endorses Proposal 1," June 26, 2014
- MLive, "Business, government leaders join hands in Saginaw to campaign for statewide ballot initiative," April 3, 2014
- PRWeb, "Lake Michigan Mailers, Inc. Endorses a “YES” vote on Proposal 1 on the August 5th Michigan Ballot," June 30, 2014
- Citizens for Strong and Safe Communities, "The Problem," accessed July 1, 2014
- Citizens for Strong and Safe Communities, "The Solution," accessed July 1, 2014
- Michigan Secretary of State, "Michigan Committee Statement of Organization," accessed April 28, 2014
- Michigan Legislature, "Senate Bill 0822 (2014)," accessed March 28, 2014
- Crain's Detroit Business, "Don't let wording confuse PPT issue," May 25, 2014
- Detroit Free Press, "Editorial: Vote yes on Proposal 1," June 8, 2014
- Observer & Eccentric, "Vote yes: Proposal 1 helps improve jobs climate," June 23, 2014
- Livingston Daily, "Proposal 1 helps Mich. jobs climate," June 16, 2014
- Holland Sentinel, "Our View: Proposal 1 is a good deal for everyone in Michigan," July 6, 2014
- Lansing State Journal, "Editorial: Pass Proposal 1 on Aug. 5 ballot," May 31, 2014
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