Making Democracy Work

State Primary Election

August 5, 2014

Ballot Proposals

PROPOSAL 14-1 - Passed August 6th, 2014

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?

LWVMI supports passage of Proposal 14-1

Action Alert from League of Women Voters of Michigan
July 26, 2014 8:32AM

Dear Member,

LWVMI supports passage of "State Proposal 14-1, 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."

LWVMI bases its support on the importance of reimbursing local units of government. If the Personal Property Tax (PPT) on businesses is eliminated, funding to local governments will be reduced. This ballot proposal is an attempt to insure that local governments are at least partially reimbursed for that loss.

As many of you know, local units of government were not pleased with the PPT bills passed in 2012 because they were not going to be reimbursed enough and now they are supporting the changes adopted in 2014 because they feel they will be receiving more reimbursement. This Legislature and Governor seem resolved to give more tax cuts to businesses so this compromise was seen by the local units of government as the best "deal."

LWVMI did not join the coalition, MI Coalition for Strong and Safe Communities, that is supporting the proposal. LWVMI is not aware of any organized opposition.

Additional information and analyses can be found on our website, http://www.lwvmi.org.

Again, LWVMI is supporting State Proposal 14-1 because it would replace funding for local governments that would be lost with the elimination of the Personal Property Tax.

In League,
Sue Smith, President
League of Women Voters of Michigan

League of Women Voters of Michigan
Judy Karandjeff
LWVMI Vice President for Advocacy

League of Women Voters of Michigan
600 West St. Joseph Street
Lansing, MI 48933

Fwd: Response to Questions re Proposal 14-1, the PPT

Action Alert from League of Women Voters of Michigan
July 28, 2014 at 4:42 PM

Dear Local League President,

As you know, over the weekend, an email was sent to all League members in the state re Ballot Proposal 14-1, which will be on the August ballot.

In addition to providing some information re the Ballot Proposal, I also stated that LWVMI is supporting approval of Proposal 14-1 and why.

I received some emails in response; some of which raised additional questions.

I recognize that you may be receiving questions, as well, so I am sharing additional information in the following statement.

Please feel free to share the statement with your members.

"Thank you for contacting LWVMI regarding your concerns about Proposal 14-1 and its support by the state League of Women Voters.

As you may know, for several years, the Legislature has been negotiating with the Michigan Municipal League and others on legislation that would (1) eliminate the Personal Property Tax (PPT) on business equipment and (2) replace the lost revenue with funds generated by the Use Tax. Currently, revenues raised by the PPT go to local communities to pay for police, fire and other community services as well as to schools. The Michigan Municipal League supported the legislation because they believed the Legislature intended to eliminate the PPT and that this legislation would at least provide needed replacement funds to local communities.

At its April meeting, the LWVMI Board approved a recommendation from the LWVMI Advocacy Committee to support Proposal 14-1. That decision was based on the LWVMI Taxation Position and our agreement with the Michigan Municipal League's assessment that the PPT was going to be eliminated and that Proposal 1 would provide at least some of the replacement funds needed by our local communities.

The League has no position on the PPT, per se, but we do agree that funds lost by a repeal of the PPT need to be replaced. Local units of government need adequate funding.

We recognize that while the revenue lost from the repeal of the PPT is supposed to be made up by the Use Tax, additional funds will have to come from the General Fund, as noted by the House and Senate Fiscal Agencies.

Proposal 14-1 is being supported by AARP, the Michigan Municipal League and the League of Women Voters of Michigan, among others.

Again, thank you for contacting us. It is important for the state League to hear from its members.

Sue Smith, President League of Women Voters of Michigan"

Background and Pros and Cons

VOTER GUIDE - League of Women Voters of Michigan Education Fund
STATE PROPOSAL 14-1
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

BACKGROUND:
This Proposal is a Referendum on Public Act 80 (PA80) of 2014 which allocates State Use Tax revenue to replace the Personal Property Tax (PPT) levied by local units of overnment. The Legislature repealed the PPT in 2012 to phase in over a multi-year period beginning in Fiscal Year 2016, partially using dollars freed up by expiring business tax credits.

The Personal Property Tax is a tax on property (not land) such as machinery, equipment, furniture, tools and computers and is paid by businesses directly to local units of governments.

Each local unit sets its rate and uses the revenue to pay for police, fire, local schools, etc. Businesses pay about $590 million annually.

The State Use Tax is assessed for the privilege of using, storing and consuming certain tangible personal property, plus the services of telephone, telegraph, and other leased wire communication; used auto sales between individuals; and use of transient hotel and motel rooms. The rate is 6% of which 1/3 is earmarked for school aid. It brought in about $1,356 million in 2011-12 in state revenues.

Under PA80 of 2014, a portion of State Use Tax revenue will be redirected to a newly created special authority for distribution to local units of government to completely replace local governmental unit revenues lost by phasing out the PPT. Also certain eligible industrial and/or commercial personal property will have an essential services assessment levied on it to lessen the financial impact of these changes on the state budget. It is estimated by the Senate Fiscal Agency that state general fund /general purpose (GF/GP) revenues would be reduced by $126 million in FY2016, the first-year of PPT exemption, and would be reduced by $483 million in FY2023 when fully phased-in.

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DISCLAIMER: The Pro and Con statements reflect the views of their major proponents and opponents as expressed during the legislative debate. The inclusion of the views of the various groups is solely in the interest of public service. The League of Women Voters takes no responsibility for the views or facts as expressed.

YES
  • Businesses and local communities have not liked the personal property tax in part because it is difficult to administer
  • The state will be responsible for collecting funds and reimbursing local units of government
  • Local units of governments receive 100% reimbursement
  • Education funding from the use tax is not changed YES vote puts Public Act 80 of 2014 into effect and allows elimination of Personal Property Tax because replacement funding is committed.

Supporting Organizations: Michigan Citizens for Strong & Safe Communities, a coalition of local government and manufacturing members, including the Michigan Municipal League and Michigan Township Association. Website: http://strongandsafecommunities.com/

NO
  • Businesses receive a large tax cut + of approximately $590 million annually - businesses already received $1.7B annual tax cut in 2012 with Michigan Business Tax change
  • State general fund budget pays for lost revenue from the repeal of the personal property tax
  • Legislature can change reimbursement as they did for revenue sharing + over $500M cut since 2000.
  • NO vote repeals PA 80 of 2014 and puts elimination of Personal Property Tax on hold because full replacement funding is not provided.

Opposing Organizations: None identified.

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