What's up with Michigan's Proposal 1?
DETROIT – Waiting until you hit the voting booth next week to read up on Proposal 1 is not advisable.
Read/download/print: Proposal 1 language
You see, the language in it is legal jargon, covering the bases necessary to deal with tax law changes as they pertain to the Michigan Constitution. Yet you will be voting whether to eliminate the century old Personal Property Tax and put in a funding mechanism that will keep tax money flowing to municipalities that have depended on this business tax for so long. But in the ballot language you will see nothing addressing the PPT. So you might wonder what is going on and might even find yourself confused as to what you are doing.
Should you vote yes or no?
Michigan's tax structure has long depended on taxing businesses in this fashion, hitting them when they buy equipment and then taxing them again every year for having and using their business property. In fact, the tax is so onerous for business that even though they can depreciate these assets [tax jargon for reducing the value annually for tax purposes], that depreciation never goes to zero. It means a business is always is paying tax on assets from as important as a die machine or as simple as a desk chair.
This is a remnant of a tax system Michigan could afford when it was the turn of the last century economic engine, where the car companies and their suppliers couldn't spend all the money they made. In this new century, however, where two of the three traditional domestic three car companies have emerged from government sponsored bankruptcy, there is not limitless money to be wrung from companies large and small.
Governor Snyder pushed a 10-pack of bills through the legislature last March knowing full well then voters would find themselves confused in August. He forged ahead because he wants Michigan's business climate, that starts with taxation, to come into the new age of competitiveness and become world class.
Business, of course, supports this legislation. Local municipalities also support it because rolled into the package is a new funding mechanism where they will still receive the money they depend on in the PPT, yet it will be largely guaranteed rather than up and down depending on the economy. This piece of the plan is what brings it before you in a ballot question.
Opposition is not with the tax repeal itself. Rose Bogaert, of the Wayne County Taxpayers Association, and other anti-tax groups actually like the idea of cutting out the PPT. They quibble with the new laws surrounding the continued flow of tax money to municipalities. They believe it opens the door for higher taxes for you and me down the road.
Ultimately, for all of the complexities, Proposal 1 explained in a nutshell comes down to whether you think businesses should remain taxed in Michigan the way they have been for more than 100 years or not.
See you at the polls next week.
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