By Rick Haglund/Bridge Magazine correspondent
Michigan businesses, which have already won a $1.6 billion business tax cut, are pushing hard to repeal the state’s personal property tax on machinery, computers and other equipment.
But they don’t talk much about, or even recognize, the $324 million tax cut they’ve received since 2007, the result of falling property values and lower tax rates.
“In all honesty, we have not had feedback from members that the property tax climate has improved,” said Tricia Kinley, senior director of tax and regulatory reform at the Michigan Chamber of Commerce.
Adjusted for inflation, owners of commercial, industrial and utility property have enjoyed a decade-long reduction in real and personal property taxes, according to an analysis of Treasury Department data by Bridge.
Since 2001, business property taxes have fallen to an inflation-adjusted $486.8 million, a 9 percent decline. The Treasury data does not provide a breakdown of real and personal property tax revenue.
Another reason for the property tax cut has been a decline in the average millage rate statewide, from 51.41 mills in 2001 to 48.94 mills in last year.
Some of the property tax reduction has been a result of business bankruptcies and closings during the recent Great Recession.
In Troy, one of the largest business hubs in metro Detroit, commercial and industrial property values have fallen about 40 percent over the past five years, said city assessor Nino Licari.
That’s in part because of rising office building vacancies, including the former headquarters of Kmart Corp.
“Our biggest problem in Troy is our office market,” Licari said. “It could be 25 years before that market recovers” to its previous peak.
Business lobbying groups say changes in the state’s business tax structure will result in a hike in the personal property tax unless changes are enacted by the Legislature.
“Yes, overall some sectors during those years got tax relief,” Kinley said about the $324 million business tax cut. “But it doesn’t at all negate the need to address the personal property tax.”
Businesses are eligible for a 35 percent personal property tax credit against their Michigan Business Tax liability, but that credit disappears when the new 6 percent corporate income tax takes effect in January.
Provisions in the MBT that exempt commercial and industrial property from some school millages remain.
A new study by the Anderson Economic Group in East Lansing found that the personal property tax puts Michigan at a competitive disadvantage with a few other states, including neighboring Indiana and Ohio that don’t levy such a tax.
The study says the tax raises the cost of owning machinery and equipment in Michigan and therefore reduces a company’s return on investment. That “discourages” investment in highly mobile capital equipment in Michigan.
President Patrick Anderson said his firm conducted the study independently to provide analysis to lawmakers and Gov. Rick Snyder’s administration as they consider changes to the personal property tax.
The Michigan Municipal League and other groups are opposed to the outright elimination of the tax, saying it provides $1 billion to fund operations of financially strapped local governments.
“We should be talking about ways to make our communities stronger, not about tax cuts that will continue to push our educated workforce to other states,” said Dan Gilmartin, executive director of the Municipal League.
Anderson agreed, saying the state cannot afford to take a $1 billion tax revenue hit.
“There’s no solution where someone doesn’t have to cough up something,” said.
And although businesses may have enjoyed a personal and real property tax cut in recent years, some say those cuts will disappear as a result of an expected future rise in property values and recent tax hikes approved by voters.
“We’re not looking at this as a positive moment in Michigan’s tax environment,” McKinley said.