Wayne County Taxpayers Association Position Paper

and Citizens Research Council of Michigan Paper

Proposal 1
APPROVAL OR DISAPPROVAL OF AMENDATORY ACT TO REDUCE STATE USE
TAX AND REPLACE WITH A LOCAL COMMUNITY STABILIZATION SHARE TO
MODERNIZE THE TAX SYSTEM TO HELP SMALL BUSINESSES GROW AND
CREATE JOBS
The amendatory act adopted by the Legislature would:
1. Reduce the state use tax and replace with a local community stabilization share
of the tax for the purpose of modernizing the tax system to help small businesses
grow and create jobs in Michigan.
2. Require Local Community Stabilization Authority to provide revenue to local
governments dedicated for local purposes, including police safety, fire
protection, and ambulance emergency services.
3. Increase portion of state use tax dedicated for aid to local school districts.
4. Prohibit Authority from increasing taxes.
5. Prohibit total use tax rate from exceeding existing constitutional 6% limitation.
Should this law be approved?
************
I want to state that the Personal Property Tax is a horrible tax and a burden to business
and employment. If I were to say to the average taxpayer that their stove, refrigerator,
washer, dryer and any other appliance or furniture were all subject to personal property
tax for 10 years after purchase with a reduction each year for depreciation, we would
have a revolt.
Anyone wishing to understand how the tax works and its effects can go to Personal
Property Tax Reform in Michigan. The Fiscal and Economic Impact of SB 1065-SB
1072, Anderson Economic Group at:
http://www.andersoneconomicgroup.com/SearchAEG/tabid/59/articleType/ArticleView/a
rticleId/8021/Personal-Property-Tax-Reform-in-Michigan-The-Fiscal-and-Economic-
Impact-of-SB-1065SB-1072.aspx or the Citizen Research Council at
https://crcmich.org/TaxOutline/index.html
This is not just an elimination of the Personal Property Tax for some small businesses.
It is about much more. It is my estimation that it was not necessary to place anything on
the ballot to allow the reduction of that tax. Everything they needed is presently included
in the State Constitution as defined in the Headlee Amendment.
Article IX Michigan Constitution
25 Voter approval of increased local taxes; prohibitions; emergency conditions;
repayment of bonded indebtedness guaranteed; implementation of section.
Sec. 25. Property taxes and other local taxes and state taxation and spending may not
be increased above the limitations specified herein without direct voter approval. The
state is prohibited from requiring any new or expanded activities by local governments
without full state financing, from reducing the proportion of state spending in the form of
aid to local governments, or from shifting the tax burden to local government. A
provision for emergency
conditions is established and the repayment of voter approved bonded indebtedness is
guaranteed.
Implementation of this section is specified in Sections 26 through 34, inclusive, of this
Article.

26 Limitation on taxes; revenue limit; refunding or transferring excess
revenues;
exceptions to revenue limitation; adjustment of state revenue and spending
limits.
Sec. 26. There is hereby established a limit on the total amount of taxes which may be
imposed by the legislature in any fiscal year on the taxpayers of this state. This limit
shall not
be changed without approval of the majority of the qualified electors voting thereon, as
provided for in Article 12 of the Constitutio n. If responsibility for funding a program
or programs is transferred from one level of government to another, as a consequence
of constitutional amendment, the state revenue and spending limits may be adjusted to
accommodate such change, provided that the total revenue authorized for
collection by both state and local governments does not exceed that amount which
would have
been authorized without such change.


29 State financing of activities or services required of local government by state
law.
Sec. 29. The state is hereby prohibited from reducing the state financed proportion of
the
necessary costs of any existing activity or service required of units of Local Government
by
state law. A new activity or service or an increase in the level of any activity or service
beyond
that required by existing law shall not be required by the legislature or any state agency
of
units of Local Government, unless a state appropriation is made and disbursed of Local
Government for any necessary increased costs. The provision of this section shall not
apply to costs incurred pursuant to Article VI, Section 18 to pay the unit.

There are 10 Senate Bills connected to this proposal. Nowhere in the ballot language is
a Personal Property Tax mentioned specifically. The bills range from SB821 through
SB830. For brevity and simplification I will address SB822 which must be passed for
most of the others to take effect.
.

We start our problem with the establishment of yet another Authority which would be
granted enormous power. Since this new Authority would not be elected by the voters,
there would be no true accountability but they would have the responsibility of handling
a huge amount of our money.
BEGINNING ON OCTOBER 1, 2015, THE SPECIFIC TAX LEVIED UNDER
SUBSECTION (1) INCLUDES BOTH A STATE SHARE TAX LEVIED BY THIS STATE
AND A LOCAL COMMUNITY STABILIZATION SHARE TAX AUTHORIZED BY THE
AMENDATORY ACT THAT ADDED SECTION 2C AND LEVIED BY THE
AUTHORITY, WHICH REPLACES THE REDUCED STATE SHARE AT THE
FOLLOWING RATES IN EACH OF THE FOLLOWING STATE FISCAL YEARS

Legislation then goes on to define the states portion of THE LOCAL COMMUNITY
STABILIZATION SHARE TAX RATE TO BE LEVIED BY THE AUTHORITY IS THAT
RATE CALCULATED BY THE DEPARTMENT OF TREASURY ON BEHALF OF THE
AUTHORITY THE STATE SHARE TAX RATE IS THAT RATE DETERMINED BY
SUBTRACTING THE LOCAL COMMUNITY STABILIZATION SHARE TAX RATE
FROM 6%.

The state then declares the revenue portion from 2015-2016 through 2029 without
knowing the accuracy of the amount listed. They will also be committing future
legislatures to a dollar amount.
This Authority would be granted an enormous responsibility. That cannot be good for
taxpayers. The line in the proposal that limits the used/sales tax to 6% does not
address the expansion of the sales tax to, for example, internet purchases or fines or
penalties for failure to comply. It does not address other things that they may choose to
include as taxable by the sales tax which they seem to think they have the authority to
adjust.
Whatever your feelings on taxes, this proposal does not give the taxpayer more
security. The language does not reflect the full nature of the outcome if it passes. If you
have concerns, I will be glad to forward copies of the bills. Please feel free to contact
me with any questions or comments. wctaxpayers@comcast.net . 313-278-8383.

The Wayne County Taxpayer Association suggests vote NO on
Proposal 1

Citizens Research Council of Michigan
http://www.crcmich.org/PUBLICAT/2010s/2014/memo1128.pdf

Summary of Key Issues

State policymakers succeeded in 2012 in enacting legislation to eliminate a large
portion of the personal property tax burden on Michigan businesses, pacticularly those
involved in the manufacturing sector.
They followed up that success with revised legislation in 2014 part of a compromise
reached with local government organizations that would largely reimburse local units
of government for their revenue losses under the new PPT exemptions. Given the
fiscal tensions between the state and local units of government, the agreement relies on
a unique and somewhat peculiar arrangement through which a new local (yet statewide)
unit of government is given authority to levy a portion of the states existing use tax as a
new local tax. Given this construct, constitutional restrictions on new local taxes require
approval by local voters which in this unique case, is all of the Michigan electorate.
The package also comes at a price.
The reimbursement provisions contained in the package are not cheap, and the State of
Michigan will forego an increasing amount of its general fund/general purpose revenue
in future years in order to hold local governments harmless from the PPT reforms. The
net loss to GF/GP revenue rises to over $500 million by FY2025, and this foregone
revenue also means foregone opportunities to use this revenue to meet other budget
priorities.
State voters in August will be asked, in a direct sense, to vote on the proposed
redirection of the states existing use tax revenue to help facilitate the reimbursement to
local governments of lost PPT revenues. But again, the vote has much broader
implications as a rejection of the ballot measure effectively repeals the entire set of
reforms, essentially re-establishing the imposition of the personal property tax on
businesses and canceling the need for the local reimbursement. Valid arguments have
been advanced by supporters of the PPT repeal that the reforms will enhance business
competitiveness and encourage additional private sector investment.
Voters will need to weigh these arguments against their own judgments as to the
potential value of other possible budget and tax reforms that could be achieved with the
state GF/GP resources that will otherwise be invested to facilitate the PPT reforms