Analysis of 2014 Proposal 1

The Michigan Personal Property Tax (PPT) has attracted consistent criticism from Michigan’s business community because it discourages business investment in equipment, puts Michigan at a competitive disadvantage in attracting manufacturing firms, and presents a particularly high compliance burden. This tax has been the subject of Anderson Economic Group analyses several times in previous years including 1999, 2005, 2006, 2011, and 2012. We also include the PPT in our annual business tax burdens analysis, in which we rank all 50 states.

A significant effort to reform the Personal Property Tax began in late 2011. Around that time, Anderson Economic Group was commissioned by the Michigan Manufacturers Association to analyze the eight-bill package that was before the Senate in April 2012. We estimated the economic and fiscal impact of that Personal Property Tax reform package, in combination with the corporate income tax (CIT) that went into effect at the beginning of that year (2012). AEG found that the reforms proposed in the 2012 bills would increase investment by up to $450 million and employment by up to 15,000. The bills we analyzed were amended before their passage in 2012; were amended again by public acts enacted in 2013; and finally amended again in 2014 by the public act that created Proposal 1.

The proposal on the Michigan ballot on August 5, 2014—Proposal 1—would partially repeal the Personal Property Tax in Michigan; reimburse local governments for lost revenue by reallocating a portion of the state use tax; implement a new “state essential services assessment” on industrial personal property owned by businesses; and limit the total rate on the use tax.

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