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Tuesday, May 1, 2012

Changes to Michigan Personal Property Tax leave uncertainty with funding local governments


Photo Credit-ROJS News
Michigan Lt. Gov. Brian Calley
answers questions at Ann Arbor, Michigan
town hall event on proposed Personal Property
Tax changes.
Lt. Gov. Brian Calley (R) and State Rep. Mark Ouimet (R) on Monday, April 30th at Washtenaw County Intermediate School district, presented presentation to Michigan's Personal Property Tax statue.

The Lt. Gov. admitted has little chances of passing both legislative chambers before the summer break sessions.

"The Senate is treating (these proposals) with urgency as opposite to the State House of Representative, where we haven't receive communications about a vote on this agenda", Lt. Gov. Calley stated. I don't believe the leadership House for Representatives is committed to moving these proposals at all, prior to the traditional summer break."

Photo Credit-ROJS News
State Rep. Mark Ouimet (R)
talk with residents at
Town Hall Meeting in
Ann Arbor, MI.
The proposals would make significant changes to Michigan's Personal Property Tax structure, including the creation of exemption small parcels (Michigan Senate Bill 1070), and establishes two used-based exemptions for new and previously existing 'Eligible Manufacturing Personal Property (Michigan Senate Bill 1069).

If the Small Parcel Exemption (SB 1070) is passed by the Michigan Senate and affirmed by the House, beginning in 2013, would exempt of taxpayer's with industrial and commercial personal property within a local tax collections unit, so long as the combined taxable value of such property is less than $40,000.

The proposed New Personal Property Exemption (SB 1069) would end taxable collections on all 'new' eligible manufacturing personal property beginning the 2016 tax year but, the exemption would also apply to property placed into service on or after 1/1/2012. Another bill (SB 1071) phases out tax on previously existing eligible manufacturing personal property over 7 years, starting in 2016.

According to the presentation by Lt. Gov. Calley and State House Rep. Mark Ouimet, although equipment purchased after 1/1/2012 by businesses would be exempt from SB 1069 if passed, the measure attempt to stop company from using the system by bringing in old property from out of state after 2011.

The Lt. Gov. responded audience member inquiry on if eliminating personal property taxes would hurt struggling local Michigan cities, villages, townships and countries who use this revenue to maintain balance budgets, by stating this tax was hurting businesses 'moving into Michigan'.
"The Personal Property Tax is the last really bad tax we have (in Michigan)," Lt. Gov. Calley stated.
Questions exist in the Lt. Governor's proposal and two pending State Senate bills how localities would make up lost revenue eliminated by SB 1069, SB 1070 and SB 1071.

The Reimbursement Fund (SB 1072) establish a weak mechanism for local unit funding by beginning in the 2016 fiscal year. The Michigan Department of Treasury would prepare an estimate allocation for political subdivision (cities, counties, townships, villages and school districts) of the revenue lost each fiscal year as a result of proposed exemptions; thus eliminating civic elected local governmental roles of preparation, debate and adopting after localized residents input their operational budget.

Lt. Gov. Calley acknowledged during the meeting, the Reimbursement Fund proposed in (SB 1072) would be subject to yearly appropriations measures enacted by Michigan Legislative branches, instead of funded equality to localities by personal property tax collections on a yearly basis.

"I've identified one very reliable source. The fly in that ointment is that it requires a appropriation from the Legislator and that's what has everyone nervous about it." Lt. Gov. Calley stated "All taxable revenue that we rely on with the exception of a very small number of them are subject to year to year changes in statues. There is a certain amount of uncertainly that comes along with this."  
Lt. Gov. Calley and State Rep. Ouimet acknowledge they will engage in more 'townhall' style meetings across Washtenaw County and separately statewide, to gauge Michigan's residents responses to this structural change to funding local government entities.

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