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Michigan PP Tax Repeal May Not Be Legal

by Morgan Thomas, Chicago and Randy Davis, Dallas, May 2013

 

The Michigan Municipal League, a non-profit organization which advocates for hundreds of local governments, believes there are serious problems with a plan to eliminate business personal property taxes in Michigan.

 

Officials say failure to fix the proposal before it's implemented could result in "devastating losses" for local governments.

 

Tax Phase Out

 

The Legislature approved a series of bills to eliminate personal property taxes for commercial and industrial property over a ten-year period and Governor Rick Snyder signed them into law. Voters must approve the plan before it's implemented.

It's unclear whether local governments can legally levy a special assessment for basic services they already provide.

 

The legislation calls for a tax phase out beginning in 2014 for businesses with less than $40,000 of taxable personal property per jurisdiction. In 2016, larger businesses would benefit, and personal property taxes would be completely repealed by 2022.

 

Replacing Revenue

 

The main problem with the personal property tax repeal is how the lost tax revenues will be replaced. The law seeks to guarantee that local governments will receive 80% of current funding for non-essential services and 100% for public safety and other essential services.

 

The replacement money for essential services would come from a special assessment. However, it's unclear whether local governments can legally levy a special assessment for basic services they already provide.

 

The Michigan Municipal League is working with state officials to try and fix this apparent problem before the issue goes before voters in August 2014.