Gov. Rick Snyder: Personal property tax reform in Michigan could take 5 to 10 years
(See related story: Rick Snyder: 'Backsliding' in U.S. economy hurts Michigan, but state is still heading in right direction)
Michigan Gov. Rick Snyder said today it could take up to a decade for the state to tackle personal property tax reform — an issue that has local governments worried they could lose millions of dollars in revenue if the tax went away without replacement funding.
"It's a very difficult question," Snyder acknowledged during an interview with AnnArbor.com's editorial board this morning. "The way I view it is, I don't want the state to just come out and tell people what to do. This is where we need a good dialogue."
Snyder has made known his intentions of exploring whether Michigan can cut $1.2 billion in personal property taxes — the tax that businesses pay on equipment ranging from computers to machinery. He said today the reason it's on his agenda is because it's holding Michigan back from being competitive and creating jobs.
Michigan Gov. Rick Snyder talks with AnnArbor.com's editorial board this morning.
Angela Cesere | AnnArbor.com
Snyder said he plans to have a working group — with local communities involved — address the issue collaboratively, and that could take time.
"If you notice this compared to our other initiatives, we don't have a set timetable to say 'here's a proposal and this is what we're going to do,'" he said, suggesting it'll likely take years to fully address. "This is a solution that could take five to 10 years to implement because of the importance to the local pieces and the replacement cycle.
"In a lot of ways, it's almost letting some of the tax run off or run down by either excluding new property or letting it wind down while a replacement comes in and addresses it."
Local governments and schools say they want a guarantee that revenue coming to them from personal property taxes doesn't evaporate.
In Washtenaw County, eliminating personal property taxes could mean the loss of $45 million to $50 million, including $6 million used to run county government, Raman Patel, the county's equalization director, told AnnArbor.com earlier this year.
Some local officials are calling for a constitutional amendment that would identify the replacement revenue and earmark it for cities and schools.
Asked whether it could be cost-neutral, Snyder said he's hopeful a solution could be reached that would achieve "relative neutrality."
"Our goal here is to make it so our local jurisdictions can be successful while we address this problem," he said. "So in many respects, one of the things, if we could achieve it, is relative neutrality in terms of that whole process. And that's because, again, there are so many instances, you can't say you're going to make sure everyone's OK."
What makes it a particularly tough issue to address, Snyder said, is that there really is no one-size-fits-all solution that works for every local community.
"You can go to some communities where the personal property tax is not a major portion of their tax base," he said. "It may be single-digit percentages and it's spread across a broad business community in terms of a lot of different payers.
"And then you'll find other communities where a personal property tax accounts for more than 50 percent of the revenue for that community — it is the primary revenue source," he said. "And in most of those instances, it goes back to one particular facility or a handful of facilities."
Snyder said there are two areas he wants to focus on as far as personal property tax reform, and that includes differentiating between commercial and industrial properties.
"I want to put more priority on the industrial side over the commercial side, because if you look at the most important piece of the job creation message, it's more on the industrial side," he said. "If we're looking at major industrial projects that tend to be the higher multiplier in terms of job creation, you put more priority on that."
Snyder said he also wants to look at possible "earlier pieces" of personal property tax reform that could be implemented sooner rather than later. He suggested that could include cutting out the "low-dollar, high-volume piece of this" from the taxpayer base.
"There are people out there (for whom) this is more a nuisance tax than anything," he said. "It is just an obnoxious tax and the administrative cost of collecting is pretty obnoxious, because you're hitting a lot of people for $100, $200, $300. And they're filling out forms, and you've got somebody reviewing all these forms for a relatively small amount of revenue."
Snyder said he's hopeful the state can work with local communities on some sort of replacement for those low dollar amounts.
"They could take out potentially half or more of these taxpayers and just get them out of the system and then focus in longer-term on the real problem areas," he said.
Snyder acknowledged he's not sure the state will be able to solve the issue for every local jurisdiction, though.
"Just because some of these have, again, one facility that accounts for most of their tax base," he said. "To say there's a permanent solution from the state to replace all of that, I'm not sure how viable that is. We need to do more homework."
Ryan J. Stanton covers government and politics for AnnArbor.com. Reach him at ryanstanton@annarbor.com or 734-623-2529. You also can follow him on Twitter or subscribe to AnnArbor.com's e-mail newsletters.
Comments
dexterreader
Tue, Sep 20, 2011 : 12:25 p.m.
I don't own or run a business, so can't speak in depth about this. But what I can say is when revenue disappears from one source, it needs to be replaced. And I have a very good feeling I know whose back it will be placed on .... the working class. Are you going to pick on public employees and retirees once again Rick? or will you find another group of people who can least afford a new tax?
Lets Get Real
Tue, Sep 20, 2011 : 12:12 p.m.
Let's Get Real - this tax is a nightmare. A little, sole proprietor spends excessive, uncompensated hours filling out forms and gathering data; then the government reviewer, who knows nothing about the particular business, decides whether the business owner filled out the forms properly, claimed everything they should have, and disputes the business' claims; the government entity gets a few hundred dollars from the very small business which is used to pay the worker who shuffles the papers. Sounds like useless big government to me. If you run a business in your home, the furniture you had before you opened the business that were not taxed - your desk, chair, computer, phone - are now a taxable item? Furniture and equipment get old, lose value, break . Think of a restaurant: dishes break, a wobbly chair is tossed out, the burner on the stove doesn't work - are they still taxed? How silly is this law? The inventory alone is nuts, let alone the condition and depreciation calculations. If you've never spent time doing this nonsense, don't criticize someone who has and understands the unreasonable drag this tax has on a company's bottom line - and not just in the dollars it pays, but also in productivity and profitability. I, for one, would love to see it go.
bobfromaccttemps
Tue, Sep 20, 2011 : 3:39 p.m.
Inventory isn't taxed and the form is not hard at all. How difficult is it writing in the same numbers as last year and then adding new purchases and removing anything disposed of. And honestly, unless you are really under reporting for your type of business, no reviewer is even going to take a look at a little sole proprietor.
wereintroubl
Tue, Sep 20, 2011 : 4:35 a.m.
Tricky Ricky elimianted tax breaks for industry under the premise that corporate tax reform AND property tax reform would replace it. He has half the equation settled (on the back of seniors, retirees, and heavy manufacturing), but the other half could take up to a decade? Meanwhile the tax break has been removed from Michigan's economic development toolbox. What major corporation would want to locate here when in essense taxes are higher for them then when this joker took over. Yes, I know, small businesses will pay less money, but tell me how many small businesses would it take to equal the economic clout of one major car plant or steel mill?
Basic Bob
Tue, Sep 20, 2011 : 1:10 a.m.
Snyder's right, just repealing this tax would kill certain local governments. Even though the personal property tax forms are a ridiculous amount of work compared to any other form of taxation. I bet it costs more for many of these governments to process the paperwork than what they actually receive. But what the heck, government inefficiency creates menial and unproductive office jobs, perfect for union organizing.
godsbreath64
Wed, Sep 21, 2011 : 3:11 a.m.
History shows Bobby can't quite break out of his bubble to back up his word.
John Q
Tue, Sep 20, 2011 : 2:46 a.m.
"I bet it costs more for many of these governments to process the paperwork than what they actually receive. " I'll take that bet.
hut hut
Mon, Sep 19, 2011 : 10:30 p.m.
Snyder only hears what he wants to hear. And he only hears what his insider supporters are telling him. Everything else he stuffs his fingers in his ears and goes nah nah nah nah. He's just another politician.
timjbd
Mon, Sep 19, 2011 : 8:59 p.m.
"The way I view it is, I don't want the state to just come out and tell people what to do. This is where we need a good dialogue." The state telling people what to do is EXACTLY what he wants to do with the emergency manager fiasco. He doesn't even keep track of his own BS.
DonBee
Mon, Sep 19, 2011 : 6:26 p.m.
I am all for both simplification and neutrality in revenue. That said, we now have a simple corporate income tax. How about doing away with the personal property tax and substituting and higher corporate income tax? This would eliminate 90% of the paperwork and keep the total revenue neutral. Then we need a mechanism to distribute the money - do we base that on where the corporate income tax is collected? -or- On who got money in the past from the personal property tax -or- On local need? -or- On....? This issue of distribution to me seems like where the hard part would be in reform.
1bit
Mon, Sep 19, 2011 : 6:12 p.m.
Not sure what the big deal is here. Maybe some of you don't pay the personal property tax, so don't understand why it doesn't make sense. But, Gov. Snyder does the sensible thing and says it should be studied and implemented carefully (5-10 years isn't enough?) and you still criticize him? How about coming up with an alternative instead?
John Q
Tue, Sep 20, 2011 : 2:50 a.m.
The big deal is that it's a significant amount of revenue for local governments and schools. I realize that some in the business community don't believe that they should have to pay anything in taxes but it costs money to provide police and fire services, operate schools, and so forth. Each tax break for businesses means less money to pay for those services or tax increases for everyone else, or if you do it Snyder's way, both tax increases and service cuts.
John Q
Mon, Sep 19, 2011 : 5:58 p.m.
Sounds like Snyder doesn't have a clue as to how to proceed.
Mick52
Mon, Sep 19, 2011 : 5:07 p.m.
I always thought this was an odd weird tax. To have to pay a tax on your equipment, furniture, etc. For sure if you add tax on tax on tax, you are going to have a hard time attracting business and jobs.
samshoe
Mon, Sep 19, 2011 : 6:56 p.m.
It is a ridiculous tax. You pay this tax annually on the same personal property until you decommission the property. As the finance manager of a small business I always factor in the personal property tax before we make any new business purchases. There is nothing like paying an annual tax on a $800 computer that you purchased 7 years ago!
RayA2
Mon, Sep 19, 2011 : 4:07 p.m.
Hey Slick, will that corporate cash you're counting on filling up your sleazy anonymous slush funds with come after you've kicked back the property tax reductions or are they willing to pony up on faith alone?
godsbreath64
Mon, Sep 19, 2011 : 5:27 p.m.
Making too much sense again, Ray. Spanky the a2.com yankee will pull your comment, again.
golfer
Mon, Sep 19, 2011 : 3:49 p.m.
thank goodness you will not be around to mess this up. why not just work on making what you did work vs changing and changing. you got to make sure what you told us that would work does. which i doubt it will!
hut hut
Mon, Sep 19, 2011 : 3:40 p.m.
Tax reform, Rick? Of course, not until you make your corporate partners bed for them.