Killing the job-killer
By: Josh Paciorek
Keep Michigan competitive, create more jobs, and ensure better opportunities for all Michiganders. These are among Governor Rick Snyder’s top priorities as he has worked hard over the past six years to reinvent Michigan.
When he took office, the Governor likes to remind people that there were two taxes that were just plain dumb — the Michigan Business Tax and the Personal Property Tax. He eliminated the Michigan Business Tax in year one and then quickly signed legislation to reform the Personal Property Tax on small businesses and manufacturers — a job-killing, burdensome tax that was assessed each year on the machinery and equipment that a business owns.
Since the reforms in 2014, Michigan has seen tremendous results, including the creation of nearly 500,000 private-sector jobs. The PPT reforms are saving Michigan’s manufacturers and small-business owners nearly $500 million per year.
But what was the PPT, and why did we have to get rid of it? Here are the top three things you need to know:
1) The PPT hindered growth and expansion
Imagine you own a manufacturing company. Business is doing well, and to keep up with demand, you look to grow, increase production, and hire more employees. But to do that, you need to purchase additional machinery and equipment.
Under the old PPT system, you would have to pay taxes on that new equipment and the rest of the equipment you own. Your manufacturing company was being penalized for investing in the very equipment it needed to function, making it more costly for companies to grow and create jobs.
So, instead of the state sending a company a thank you note for creating jobs, it was sending them a higher tax bill!
The PPT reforms removed that tax on equipment and machinery, providing more opportunities for companies to expand.
2) PPT reforms included more stability for local communities
The PPT generated an important source of revenue for local governments. When Governor Snyder and lawmakers were discussing PPT reforms, they understood that it was important to protect funding for local services, such as police and firefighters.
However, while the previous PPT system provided a source of revenue for local municipalities, it was an unreliable source. For example, if a small business had to leave town, the local government would lose important tax revenue that it once relied upon.
The PPT reforms now provide more stable local government revenue by allowing governments to have ownership of a portion of the state’s use tax, ensuring essential services that enhance the quality of life for all Michiganders can be maintained.
3) This was a bipartisan solution that enjoyed broad support
When the governor signed these reforms in 2014, Lt. Governor Brian Calley, local government and school officials, and a bipartisan coalition of state legislators joined him to celebrate the new legislation.
Many different entities came together because it was widely understood that the personal property tax was hindering Michigan’s comeback. By reforming our tax code, this bipartisan coalition helped to make Michigan more competitive for job creators.
All week we will be breaking down the $2.1 billion in tax cuts and credits that are already in law but will increasingly benefit Michiganders over the next few years.