Personal property tax elimination would result in $500 million tax cut when fully phased in
Proposal 1 on the Aug. 5 ballot would cut personal property taxes by about $500 million a year once fully phased in, according to a Mackinac Center for Public Policy analysis.
However, some voters may think it raises taxes due to its complicated ballot language, said James Hohman, assistant director of fiscal policy at the Mackinac Center.
Prop 1 cuts the taxes levied on businesses for equipment and machinery and guarantees that local governments will have that money replaced.
Hohman, who researched the proposal and wrote a policy brief on it, said his concerns are with the ballot language. Specifically, he said he's concerned with two passages that he thinks may confuse voters into thinking the proposal will raise taxes.
The ballot reads: "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."
Hohman said the phrase, "modernizing the tax system," could give voters the impression that means a tax increase. He said a second point that references providing a dedicated revenue stream to local governments also is misleading and could lead people to believe that will require a tax increase.
It reads: "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."
Tricia Kinley, senior director of tax and regulatory reform at the Michigan Chamber of Commerce, said it is a challenge to do ballot language on such a complicated proposal.
"Let me put it this way, there is no doubt that is a complicated reform, period," Kinley said. "There are a lot of pieces and parts to it. Due to that, you always run the risk of giving voters too much information or not enough information. This one is a little more complicated. The ballot language was chosen very carefully to give a big picture of what this is trying to do. We know it was a challenge of how to try to persuade voters in a 100 words or less, if they haven't properly educated themselves that this is a positive measure."
Here is the full ballot language:
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?