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Original article URL: http://bridgemi.com/2014/07/proposal-1-spot-toes-the-line-on-factual-claims/

Michigan Truth Squad

A project of
the Center for Michigan.

Proposal 1 spot toes the line on factual claims

Who: Michigan Citizens for Strong and Safe Communities
What: “Facts,” a 30-second ad supporting Prop 1
The call: No Foul

The only statewide ballot proposal voters will see in the primary Aug. 5 is a complex tax question with a major impact on Michigan businesses and communities. If approved, the state’s personal property tax, which is imposed on many types of business equipment, would be repealed and communities that had benefited from the tax would receive the same amount of money through a different tax.

Proposal 1 has no organized opposition, and is supported by most Republican and Democratic leaders, business leaders and communities. The complexity of the ballot question, though, could lead some voters to not vote on the issue or vote no. Michigan Citizens for Strong and Safe Communities is a collection of business and government officials who are leading an education campaign.

Relevant text:

“Proposal 1 will make Michigan more competitive by eliminating the unfair double tax on personal property that small businesses are forced to pay. That will create up to 15,000 new jobs without raising taxes. Proposal 1 will also stabilize community funding for local schools, police and fire protection.”

If passed, Proposal 1 would eliminate what businesses have for years described as a “double tax,” in which they pay a sales tax on new equipment, and personal property tax on that equipment for years afterward.

The ballot measure would also assure that communities, which received the revenue raised from the personal property tax, will not lose money; communities will instead receive funding through the diversion of revenue from a different tax that is already being collected. In simplest terms, businesses will save money, communities don’t lose money, and nobody gets taxed any more than they are already.

The claim that passage of Proposal 1 would create 15,000 jobs is based on a report by the Anderson Economic Group that projects the elimination of PPT could lead to an additional 6,000 to 15,000 jobs.

That analysis was commissioned by the Michigan Manufacturers Association, an organization whose members stand to gain substantially from the repeal of PPT. Some economists say that the actual impact on employment will be modest, and that there’s a chance it could actually cost jobs.

The call: No Foul

The Personal Property Tax is a double tax, as stated in the ad. Proposal 1 also would stabilize revenue for communities. The ad pushes the envelope on its job-gain claim, but the claim is supported.

66 comments from Bridge readers.Add mine!

  1. ***

    I’m not buying the 15,000 new jobs claim. We have heard variations of the song and dance before with tax issues and the results have not been impressive.

  2. Jean Kozek

    I had assumed that the personal property tax was addressed when Lansing changed other business tax laws. If this law is unfair, WHY wasn’t it corrected then? My fear is that the state legislature will not reimburse local communities for the revenues lost.

    Years ago local communities collected tax revenue from local businesses, but now the state collects most of those tax dollars and determines how those funds are redistributed to communities. Daily we read about communities running deficits due to reduced funds from the state. Public schools are closing media centers/libraries and class sizes are increased when teachers are laid off due to revenue loss. Local roads are in dangerous disrepair due to reduced revenues from the state. Lansing politicians react to concerns about deficit spending by threatening to replace locally elected officials with Emergency Managers.

    I don’t trust our elected officials in Lansing to protect the economic viability of local communities. To date their focus has been to give a few corporations $1.8 billion in tax cuts EVERY year. They increased taxes on workers and retirees to the tune of $1.2 billion. We citizens have not benefited from these changes in tax policy. For these reasons I will oppose the ballot issue about eliminating the personal property business tax.

    1. Patty

      I totally agree with everything that you pointed out. However, my question is, so who are they receiving this money from when they say they are using money that was already being collected as a tax. Are the residents of Michigan replacing the personal property tax that businesses were paying?

      1. Mary Hall

        One review of this tax stated that #5 on the proposal is misleading since it states that funds will come from the state use tax that is capped at 6%. The article I read reports that the use tax doesn’t have a cap, only the sales tax. I have just started to study this proposal and I’m very skeptical.

  3. Susan

    Even if the state does make local governments whole, this is a diversion of dollars currently going to other services at the state and local levels, so there WILL be a reduction in resources over all. Moreover, this shift to state revenue runs the risk of eroding local control. If the state holds the purse strings, the state will set the priorities for spending, and they may not be the same as those of local communities in diverse parts of the state, with diverse needs and interests.

  4. Susan

    Even if the state does make local governments whole, this is a diversion of dollars currently going to other services at the state and local levels, so there WILL be a reduction in resources over all. Moreover, this shift to state revenue runs the risk of eroding local control. If the state holds the purse strings, the state will set the priorities for spending, and they may not be the same as those of local communities in diverse parts of the state, with diverse needs and interests.

  5. Paul Beach

    There is a sales tax exemption for industrial processing equipment.

    1. Bruce

      Have been waiting for someone to raise that point – it’s crucial to the debate.

    2. Anon

      Yes, which would seem to warrant a foul call by the Truth Squad. Also, the proposal will have little impact on small business. The legislature already enacted an exemption for any business with $80,000 in personal property within a local unit of government. This “small taxpayer exemption” will continue regardless of the outcome of the proposal 1 vote.

      1. Bob

        The Gov has threatened to remove the small business exemption if this doesn’t pass.

        Also, a double tax would infer a tax being charged twice in the same year. Sales tax and property tax would never be paid in the same year.

  6. Jim

    I just don’t buy the hype on Proposal 1. If this tax is so onerous on businesses then it must be quite large. Yet the hype says “no new taxes”.
    I interpret that as “no new state taxes”.
    Engler took away our county road monies and now we have had to pass both a county and a township tax for our roads.
    I expect the same result when Proposal 1 passes. In a very short time we will have new local taxes to make up for this shortfall.

  7. Rick

    This whole proposal looks flawed and why can’t our do nothing legislature just fix it without a ballot proposal?

    I don’t trust this group to fill the hole either (nor the ones in the roads) so I’ll be voting no.

    1. Jerry

      Because of the Headlee Amendment. That’s why there is a vote.This whole discussion is based on the opinions of ill informed people. A YES vote is endorsed by EVERY informed organization from AARP to Michigan Municipal League to Michigan Professional Firefighters Union. There is no new tax, the use tax is constitutionally limited to 6% without a vote of the people and the Essential Services Assessment is only paid by large manufacturers who got a PPT break. The Personal Property Tax has already been done away with by the legislature. The Proposal 1 vote is only to approve the change in the way municipalities get 100% of the money they got under the old PPT scheme. A YES vote is crucial to keep cities whole. Read more at http://www.StrongAndSafeCommunities.com

      1. Tom

        I’m voting NO…. the language is odd at be best and I’m with Mark, why are they trying to sneak this in on a primary???

  8. Pamela

    “communities will instead receive funding through a diversion of revenue from a different tax that is already being collected.” Which tax is that and where is it going now?

  9. Phill Orth

    I consider myself a well informed voter who has voted in just about every election for the past 40+ years. We tried to get a handle on Proposal 1 but gave up in frustration coupled with a level of distrust. My wife and I voted no, not because we are opposed to tax reform but because we just did not understand how it worked and did not trust the political process that put it forth. It should not take something this complex to reform taxation.

    1. Jerry

      Being uniformed is not a good reason for a no vote. If you don’t understand an issue of candidate you should not vote on the issue at all.

      1. john

        A poorly written ballot proposal that is unclear is not the voter’s problem. How many times have politicians confused the issue to get what they want by tricking the voters? Definitely a no vote is appropriate for any ballot proposal that does clearly explain how the funding being diverted is going to be replaced.

        1. Mary Hall

          I agree. No one should vote for something that isn’t clear in the proposal. Not voting is not an option. I vote NO.

  10. Jerry

    This proposal is just another shift of the tax burden from business to individuals. Homeowners and renters, through a portion of their rent, pay taxes on their property every year. How then is it so unfair that businesses have to pay taxes on their property every year? Also the ballot language says that the tax can never be raised, but it can be lowered. The new Authority created by the law has the power to lower business taxes but not raise them. As soon as the law is passed the business lobby “army” will no doubt begin an all out assault to get the taxes lowered, leaving the citizens of Michigan to make up the difference. The business community will say that their lower taxes will lead to lower prices and higher wages but in reality it will just increase profits. Business don’t automatically lower prices or raise wages because of decreased costs, they only lower prices or increase wages if they think they will increase sales enough to make even more profits by doing so. It is a myth that lower taxes lead to lower prices and higher wages, perpetuated by the business community. And all this will be in our state constitution. VOTE NO!

    1. Kris

      This as absolutely nothing to do with the taxes businesses pay on their physical location. This only has to do with the fact that they pay tax every year on equipment they already own. I talked to a business owner yesterday who has been paying tax every year on an excavator that he bought 10 years ago…even though he paid sales tax on it when he bought it. If this tax was levied on you, it would mean that even though you paid sales tax on a new stove, every year the state is going to tax you on it, because it is “your personal property”. Thank your lucky stars that you don’t have to pay that tax (but businesses do it every year). It is obvious you don’t understand this proposal or the larger economic picture as most of your argument has absolutely nothing to do with this proposal. Please do us all a favor and don’t vote if you can’t do enough research to get your facts straight. And that may mean that you actually have to talk to business owners and legislators, rather than reading information from the internet.

      1. Jerry

        Kris:
        I was making an analogy, not a direct comparison. Both are still a tax on property owned, i.e. personal property tax.

        1. Matt

          The proper comparison would be the local assessor coming into your home and accessing a tax on each and every piece of personal property you own. Furniture, appliances, clothing, TVs Etc etc … this would lead to open rebellion and riots. One more example of the BS in the line that businesses receive special favoritism in Michigan.

          1. Bob

            30+ other states have this tax, The reason MI and others don’t tax our personal belongings is because they are not used for the production of income.

  11. Cathy Muelle.

    It’s the lack of credibility on the legislature’s word that will compel me to vote no. Look at how
    the legislature has stolen money from k-12 education, promised via a 2% sales tax increase, to name just one of many broken promises.

    1. Chuck Lockwood

      Cathy, agreed, and another reason to vote “No” is there is no guarantee the legislature won’t break whatever promises are made and keep the money from local governments in the future.

  12. Pete Brown

    Need more facts on sales tax exemption for industrial processing equipment. True? If so why is this fact being ignored/covered up by supporters?
    Also, where exactly will the funds for municipalities come from. Presumably these are funds already being collected by some tax and used for some other purpose. If the funds are redirected back to communities, then what will be short changed?

  13. Denise

    “communities will instead receive funding through the diversion of revenue from a different tax that is already being collected.” A different tax? Not specific enough. Sorry, now that schools and local government have gone though such hardship, I don’t trust this proposal. “Proposal 1 will also stabilize community funding for local schools, police and fire protection.” How? Not enough information to trust the proposal. Explain to me specifically how funding will be stabilized. Much too general a statement, hence I distrust it. I’ve heard the radio ads and TV ads but none of them provide support for their claims. I agree the double tax on businesses is not fair but I am not convinced repealing that tax will help schools and local government. I am sick to my stomach about the lack of funding for schools. Can’t take the chance.

  14. Tom

    The fact that both parties and most of the major associations and organizations likely to be affected support this proposal, but we still see such skepticism and outright distrust in the comments above — this alone should tell our elected officials how little credibility they have with the voters and how dissatisfied we are with their performance in Lansing.

  15. Bernadine Bennett

    This doesn’t make any sense. Rob Peter to pay Paul. Well, Peter is getting tired of it. Remember when they did that for the payment of education? How did that work out for you? We still have have property taxes and the schools are being starved to death because of not enough revenue from the sales taxes and other state revenue. Teacher layoffs and program cuts have been the result. Too bad Engler didn’t take care of much of the infastructure problems when he had a surplus during Clinton’ administration instead of cutting taxes and not spending money on the needs of the state. the GOP administrations don’t seem to look ahead. Just get your resume updated is the order of the date. Kill some wolves, get some firecrackers, gerrymander, interfere in the needs of women, and block as much voting as you can. Now this. Of course the businesses are happy. It is in their interest, not the workers or the retirees. That’s for sure. The retirees have already paid more than a billion dollars to subsidize this idea and it wasn’t enough. Now they want the rest of you to open up your wallets or the businesses will have to pay their share of the up-keeping of the state.

  16. Janet Buchholz

    Between the confusing wording of the proposal and lack of information, quite a few voters will probably vote “NO”. This is the scary part for most…… “communities will instead receive funding through the diversion of revenue from a different tax that is already being collected”. People want to know precisely what this “already collected tax” is and from where and what these funds will be diverted in order to pay for this. It’s not like there is some secret stash of unused revenue to tap into. Voters are wary of “shifting” tax burdens and legislators diverting revenues away from vital things like the School Aid Fund, etc. to offset tax breaks for businesses and other expenditures. Proposal 1 may very well be a wonderful thing, but to garner support, there needs to be more information shared before next week. It would helpful if BRIDGE could do a follow up article with more of these pertinent details.

  17. Rick

    Baloney “toes the line” – maybe the TV spot does, but not this recent mailing: I got a card in the mail from “Michigan Citizens for Strong and Safe Communities” and they indicate that Morgan Curry’s son is still paying personal property tax on a grinder purchased in 1966 or before! Only if he has a bad accountant or failed to report to his assessor properly! This equipment would certainly be fully depreciated after 48 years and he would not pay any personal property tax on it “every year”. This is a total exaggeration.

    They also claim that all libraries would be reimbursed and the MLA is in favor of the proposal. District libraries would not be reimbursed for their losses, since the reimbursement from the State of MI will be for public safety “essential services” (police, fire, ambulance, etc). Please review the reimbursement worksheet put out July 7th by the MI Dept. of Treasury, which I found on the Michigan Municipal League website (see below).

    The 15,000 jobs created will be at the cost of the taxpayers as it will take more employees in State Government to handle the reimbursements to all of our communities and more time for community assessors to audit for the next 20 years that this will take to eliminate the tax (see below). Who knows how long it will take to reimburse local communities for their losses, while Lansing holds their money.

    I am for elimination of the personal property tax, but I cannot stand dishonest information put out that can influence voters! The legislature is to blame for this faulty legislation and ballot proposal and now this group of business leaders are joining the party. Please get the FACTS out there!

    There is a copy of the State Treasury form (ppt-reimbursement-worksheet.xls) for reimbursement on the Michigan Municipal League blog.

    Treasury Releases PPT Reimbursement Calculator
    Posted on July 8, 2014 by Samantha Harkins
    The Department of Treasury has released a personal property tax reimbursement spreadsheet to help members calculate their reimbursement amounts under the legislation the Governor signed in March. You can view the spreadsheet and determine your community’s reimbursement amount here: ppt reimbursement worksheet

    Samantha Harkins is the Director of State Affairs for the League handling municipal finance issues. She can be reached at sharkins@mml.org or 517-908-0306

    1. Pamela

      I had the same (or similar) thought about depreciation of the business equipment. Why would any competent businessman be paying taxes on the original value of their business equipment? Depreciation schedules are explained in a Wikipedia article on Modified Accelerated Cost Recovery System (MACRS) which is used by all states except California. I hope that business owners are aware of this.

      1. Lisa

        Glad to see someone bring up depreciation on furniture, fixtures and equipment. My expectation as a citizen is that my legislature will write ballot proposals that are specific and understandable. Proposal 1 is neither. I hope voters will pay more attention to the facts, rather than the ads and do some digging. Thanks for this analysis and for the thoughtful comments.

  18. Robin

    I have written extensively on the issue of our State governments mismanagement of tax payers dollars and terrible management of the States departments and agencies in a piece entitled, “My Election Year Promises Wish List. In that piece I state that the bottom line is what we have in Michigan is more of a spending issue than a revenue issue. It should come up in a Google search.

  19. Barry

    A newer version of the old John Engler “smoke and mirrors” funding of Michigan’s government entities. We will pay dearly for this a few years down the road but by then we will have awakened and elected some sensible Democrats who, unfortunately will get the blame as Jennifer Granholm did.

  20. Dave

    Vote No. Another con job from our friends in Lansing.
    First warning: 15,000 jobs Second warning: “stabilize community funding for local schools, police and fire protection.” Can you imagine that the party of defunding public schools will not use any money realized for charter schools and private schools…and continue to strangle the public school system?

  21. Ramona

    Which “different tax”? Shouldn’t that have been a key point in your judgment on Proposal 1? How will it “stabilize community funding”? Where is the opposition point of view? 15,000 jobs? Where? How?

    I call “foul” on this article. Sounds like a press release for the Michigan Citizens for Strong and Safe Communities, which would be okay if it were a press release. But it’s not. It’s supposed to be an honest appraisal of “factual claims”.

    According to the Northern Michigan Chamber Alliance, this is what will replace it: “Revenues will be replaced with the more equitable and stable state Use Tax, with the majority of replacement revenue coming from expiring business tax credits.” I don’t know if that’s a good thing or a bad thing.

    I see that Gretchen Whitmer is for it, so there is some bipartisanship going on, but I admit I’m suspicious of her strange bedfellows. They’re not known for their people skills. I want more information about the long term effects of this proposal. I hope The Bridge will oblige.

  22. Mort

    Business are always crying about taxes and regulation. Republicans have cut taxes already without any new jobs being created. Anyone who has successfully completed 2nd grade math understands that you can’t eliminate a tax without either raising them elsewhere or cutting funding to something(s). I don’t buy the loophole elimination thing–politicians have been talking about loopholes as a solution for decades. Somehow, they’re never a solution in the end.

    This stinks, just like the last proposal (school funding) “Democrats and Republicans unanimously agreed on”. I’m voting no. It isn’t because this proposal is too complex. It isn’t because I don’t understand. It is because I’ve heard this story too many times before. I wasn’t dumb enough to fall for it 20 years ago (school funding). I’m not dumb enough to fall for it now.

  23. Gene Markel

    Proposal is a perfect example of doublespeak. The PPT is gone.

  24. Larry

    Every year I pay property tax on the same piece of land. When am I going to get a break! If there is new money about to come in put in roads not business. Have we donated enough to the business class.

  25. EB

    Machinery and materials used to manufacture are exempt from sales tax in Michigan; it’s called the industrial processing exemption. The double taxation argument doesn’t apply to most manufacturing purchases.

    I’d like to see all business sales tax exemptions repealed; in every case the exemption is a giveaway to some special interest.

  26. Janet Vandenabeele

    These days, political ads proclaiming that something as yet not enacted (but supported by Big Business) will create jobs reads to me like those emails I get promising growth of a bodily appendage I don’t even have.

    So the real issue is whether it’s going to hurt municipalities. And unlike what you say here, the mayor of one of the largest cities in the state is vigorously opposed to Prop 1. I mean, his city doesn’t even have enough money to support the First Amendment rights of non-Christians, and now they’re going to have to throw money at some lawyers … so let’s not make things worse for them, OK?

    1. Jerry

      If you’re referring to Mayor Fouts his Op ED was full of errors. He must have never read the bill. His city will get 100% of the money he used to get if Proposal 1 passes. Since the Personal Property Tax has already been eliminated by the legislature, it’s possible his city could get nothing if Proposal 1 fails. A YES vote for Proposal 1 just OK’s the new funding stream and is required by the Headlee Amendment. Read all the UNION and municipal supporters at http://www.strongandsafecommunities.com

  27. william werhane

    foul Ad says 100% for jails libraries Not True small businesses, ford motor co. small business already get $80K excluded.. FOUL

    1. jerry

      This whole discussion is based on the opinions of ill informed people. A YES vote is endorsed by EVERY informed organization from AARP to Michigan Municipal League to Michigan Professional Firefighters Union. There is no new tax, the use tax is constitutionally limited to 6% without a vote of the people and the Essential Services Assessment is only paid by large manufacturers who got a PPT break. The Personal Property Tax has already been done away with by the legislature. The Proposal 1 vote is only to approve the change in the way municipalities get 100% of the money they got under the old PPT scheme. A YES vote is crucial to keep cities whole. Read more at http://www.StrongAndSafeCommunities.com

      1. John Q.

        The use tax is not limited to 6% constitutionally.

    2. Jerry

      You don’t understand what Prop 1 is about. The PPT has already been eliminated. The Proposal asks voters, because of the Headlee Amendment, to approve the new funding stream from existing taxes (use tax) and the new Essential Services Assessment on large manufacturers like Ford Motor to fund 100% of what municipalities got under the old less stable PPT scheme. http://www.StrongAndSafeCommunities.com

      1. John Q.

        But if you go that web site, there’s zero explanation of how the funding will work. Don’t blame voters for not agreeing to a proposal that’s nearly impossible to understand.

  28. Cliff Schrader

    Nowhere do the supporters explain where the money will come from to replace the massive amount of tax dollars lost, but I bet it will come from you.

    And the spin that this tax is a double tax! How silly. I see no movement to stop the double taxation on my house. There was a sale tax (called a transfer tax) when I purchase my home. Then every year since I pay a property tax to the government. Same thing … different name. Why no movement to stop these unfair double taxations. Oh … Oh … maybe because home owners don’t kick in the big buy yourselve a politician”
    the business community does !!!

  29. Diana Menhennick

    Why is no talking about the local sustablization authority that this legislation will create? This authority will be charged with funneling the money back to communities and apppointees will be at the whim of the governor. This is reason not to vote yes on prop 1. This proposal is written to confuse voters and strangle local communities.

  30. Mark

    This will cost us 1/2 a billion dollars!!!! Where do we have an existing tax that we can divert that much money from? What new tax will they have to create without our approval? We cannot trust out Michigan Legislature! Vote No.

    1. Mark

      I forgot to add; Why are they using a State Primary to sneak this through?????????

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