Even with no opposition, is Proposal 1 in trouble?

The confusing nature of the Proposal 1 question could doom it at the polls this Tuesday. (Photo by Flickr user the Italian voice; used under Creative Commons license)

Maybe it’s cynicism.

Maybe it’s bad messaging.

And maybe it’s just a sign of the times: that a public ballot proposal with support from the vast majority of Republican and Democrat politicians may not have the support of the public.

Proposal 1 is billed as a win for everyone – businesses get a tax cut, communities get stable funding from a different source, and residents don’t get socked with a tax hike.

Yet Prop 1, with more than $8 million spent in support and no organized opposition, faces a real possibility of being voted down in Tuesday’s primary. That outcome could set off a chain of events that could devastate Michigan communities.

“If voters don’t approve it at the ballot, it’s going to hurt local units of government more than anyone else,” warned Deena Bosworth, director of governmental affairs for the Michigan Association of Counties. “It’s scary. I don’t know where people are on this.”

What exactly am I voting on?

Prop 1 asks voters to give their blessing to two things: the repeal of most of the state’s personal property tax that most businesses pay on equipment, and rerouting money collected from the state’s user tax, a different, already-existing business tax, to make up the money municipalities would lose from eliminating the PPT.

Even when stated clearly, Prop 1 is difficult for most folks to get their arms around. Add to that the fact that the language on the ballot is confusing, may include an error, and doesn’t even mention the personal property tax being repealed, and you’ve got a proposal that appears to be in deep trouble.

Prop 1 has the support of Republican and Democrat leaders, a massive television, mail and social media campaign, and no organized opposition.

Roger Martin of Martin-Waymire Advocacy Communications is a veteran of 11 ballot initiative battles. He said he believes Prop 1 will pass, but acknowledges the challenges unique to this proposal.

Voters may have “ballot proposal fatigue” from 2012, when residents voted down all six ballot initiatives on the ballot. “I believe Prop 1 will pass,” said Martin, who’s not connected to this year’s proposal. “With $8 million in spending and no organized opposition, there’s no way in heck it should lose.”

Yet a July poll released by Public Sector Consultants and Denno Research, found 31 percent of respondents said they were likely to vote for Prop 1, with 27 percent likely to vote no; 42 percent were neutral or unsure how they would vote.

(Disclosure: Martin-Waymire and Public Sector Consultants perform consulting and other services for the Center for Michigan and Bridge Magazine.These consultants exercise no editorial review or control over Bridge reporting.)

“It’s complicated – you can’t explain it in 30 seconds,” said Bosworth, whose Michigan Association of Counties supports Prop 1. “People don’t understand it.”

Generally, voters who don’t understand a ballot proposal either don’t vote or vote no.

Adding to the jittery stomachs is the reaction on social media, which has been overwhelmingly negative.

“I don’t trust our elected officials in Lansing to protect the economic viability of local communities,” wrote one reader of a Truth Squad analysis of an ad promoting Prop 1.

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

“It’s completely bizarre,” said a frustrated Bosworth. “There’s no reason not to support this other than, ‘I don’t trust Lansing so I’m going to vote no.’”

Does ‘No’ trigger a slow-motion train wreck?

What happens if voters reject Prop 1?

Things go back to the way they were. The personal property tax is back, and communities would continue to get PPT revenue as they have in the past.

But some believe it wouldn’t stay that way for long. “I don’t think (PPT) is going to fade as an issue,” said Tony Stamas, director of governmental affairs for the Small Business Association of Michigan. “I think there will be a push to remove it (PPT) anyway.”

The legislature could, and many expect would, pass a new repeal of PPT during the lame duck session between the November election and Dec. 31. That would give Michigan businesses the tax cut they want.

But it could also cut tax revenue to Michigan towns and counties.

The legislature could promise to use general fund dollars to replace the revenue communities would lose from a PPT repeal. But without dedicated funds from the redirected user tax (the other important component of Prop 1), municipalities would have to make their case for funding every year, rather than having a guaranteed revenue stream.

“The Legislature has a short-term memory problem because of term limits,” Bosworth said. “Two years or three years from now when they’re in a budget crunch, they may not remember why they’re giving that money” to municipalities.

The bargain struck between businesses and communities represented by Prop 1 took years to finesse in Lansing and, in the end, drew the support of the vast majority of the state’s political, business and community leaders. “If this isn’t successful, I don’t know what we have to do,” said Stamas, of the small business group.

Confusion abounds

The PPT has never been popular. It forces businesses to pay a tax every year on equipment. Businesses view it as unfair because they also paid a sales tax on the equipment when it was purchased.

Proceeds from the PPT go to the cities, towns and counties where those businesses operate. The PPT generated $844 million in 2011, according to a Senate Fiscal Agency analysis.

In the state as a whole, the PPT represents about 7 percent of all property tax value, according to a Citizens Research Council analysis of the ballot proposal.

For some communities, though, PPT revenues are huge. In Carson City, PPT revenues are 71 percent of all property tax value, according to the CRC report. Midland, home of Dow Chemical, has $733 million in personal property tax value in 2013.

In 30 communities with large industrial bases, PPT makes up more than 30 percent of all property tax value.

PPT repeal isn’t technically on the ballot, but only kicks in if Prop 1 is approved. What is on the ballot is the approval of the rerouting of some existing user tax fees to local communities to make up for the loss of PPT. Michigan’s user tax is another tax paid by businesses.

The wording of the ballot, though, is likely to leave a lot of voters scratching their heads.

Besides being confusing, the ballot language also may include an error. The proposal says there is a constitutional limit of 6 percent on the use tax; there is no constitutional limit on the use tax, according to an analysis by the nonpartisan Citizens Research Council.

Other analyses point to mixed results if Prop 1 is passed.

For example, a report released Wednesday by the Anderson Economic Group projects that the elimination of the PPT could be responsible for 5,000 to 11,700 new jobs in Michigan by 2025, through businesses using PPT savings to expand. That report was commissioned by a nonprofit organization called Small Business for Michigan, which, according to its address, is in the same office as the Small Business Association of Michigan.

That same report includes a caution: The rerouting of user tax revenues to cities and counties will lead to a reduction in the state’s general fund of $407 million by 2020, and $497 million by 2025. While the Legislature plans to use expiring tax credits to cover the loss if Prop 1 passes, it would still mean that some programs likely will be funded at lower levels than they would have been if Prop 1 is rejected.

A Michigan State University analysis of Prop 1 reached a similar conclusion: “While businesses benefit from a reduction in taxes and locals benefit from more stable funding to provide public safety, state-provided services such as prisons, state police, highways and higher education may decline.”

Campaign spending: $8 million to zero

The group formed to promote Prop 1, Michigan Citizens for Strong and Safe Communities, has flooded the airwaves and social media with ads encouraging primary voters to vote yes.

See Truth Squad call on ad promoting Prop 1.

Prop 1 has been endorsed by groups ranging from AARP to police and fire unions, Business Leaders of Michigan and the Michigan Association of School Boards.

“The tremendous advantage we have is we have support across the board, whether Democrat or Republican, business or community,” said Kelly Rossman-McKinney, spokesperson for the Prop 1 advocacy group. “I’ve never seen an issue that has broader, deeper support.”

Support among voters, though, is a bit softer.

“We’re working really hard,” Rossman-McKinney said. “We have paid advertising up right now."

“You’re going to have that segment” of voters who know nothing about Prop 1 before they enter a voting booth, Stamas said, “so we just have to crisscross the state and make sure the other segments are informed.”