On May 22, the Board of State Canvassers added Proposal 1 to the August 5 primary ballot. Every year, small businesses in Michigan must pay a personal property tax in addition to 6% sales tax on equipment. The proposal is a continuation of the Business Tax eliminated in 2011.
â??The environment should be better for businessâ?? said Senator Tom Casperson (R), 38th District. â??It has already gotten there with a lot of things that have happened already like getting rid of the business tax that we had in place before we came into office.â??
Supporters say the personal property tax discourages new investment and encourages companies to consider other states. Passage would create 15,000 new jobs and increase business investment by nearly $450 million.
â??If I have a business that is willing to buy more equipment and grow, then you have the whole employment side of the equationâ?? said Casperson. â??The fact that you are stimulating the economy by buying this equipment and the growth of the company, you are allowing the company to grow and not make that decision, â??Do I buy a new piece of equipment and then pay even more personal property tax or just stay with my old piece of equipment?â??â??.
Funds raised from this tax are used to provide local services such as police, schools and roads. Funds would be replaced by a State Use Tax and Essential Services Assessment.
â??If that is all we have left at this point to try to make our climate competitive with the rest, we are in pretty good shape because we have made quite a few improvementsâ?? said Casperson. â??If this gets put in place, I think we can compete with just about every state out there.â??
Those opposed to eliminating the personal property tax believe in addition to it not having an impact on growing small businesses, the money raised from the State Use Tax would be used to expand tax collection on online sales in the future. According to Paul Homeniuk, candidate for governor from the Green Party of Michigan, the Michigan Economic Development Corporation (MEDC) allows the Michigan Strategic Fund to lower or grant exemptions for businesses if they claim they will invest $25 million in new equipment in Michigan, but require little or no verification or documentation.
â??If you ask any small businesses around your area if they had $1,500 knocked off of their taxes if that would enable them to start hiring more people, they will tell you â??noâ??â?? said Homeniuk.
If Proposal 1 passes, the new taxes would begin in 2016 and be phased in over several years. It is expected to generate almost $119 million per year by 2028.