Three exemptions to personal property tax, not elimination
The ad states, “Proposal 1 will make Michigan more competitive by eliminating the unfair double tax on personal property that small businesses are forced to pay. That will create up to 15,000 new jobs without raising taxes.”
Proposal 1 does not eliminate personal property taxes. Instead, it creates three new exemptions: for businesses that own less than $80,000 in equipment in a taxing jurisdiction, for new manufacturing equipment and it phases in exemptions for older manufacturing equipment. Non-manufacturing businesses that own more than $80,000 in equipment will be unaffected by this proposal.
The state already mitigated the “double tax” on industrial business equipment. Sales taxes are typically levied on purchases of equipment by businesses, and personal property taxes are levied on the value of equipment annually, making the combination a “double tax” on equipment. However, industrial processing equipment is already exempt from sales taxes.
Non-manufacturing businesses with more than $80,000 in personal property will keep paying both sales taxes and personal property taxes.
The ad would be accurate if it was only about eliminating personal property taxes on businesses with less than $80,000 in equipment — the proposal will eliminate double-taxes on non-manufacturing businesses that own less than $80,000 in equipment. Otherwise, the “double tax” will not change. This context may be understandably left out in an ad supporting the Proposal. If the ad were only referencing the small parcel exemption, however, the jobs projections the ad uses afterwards would no longer be accurate.
The jobs projections are based on the entire proposal, a proposal which includes manufacturing exemptions in addition to the small parcel exemption. Moreover, these projections are based on an earlier version of the proposal, one that was later amended this year. The same group analyzed the newer version of the proposal and found smaller job impacts — that it would create between 5,000 jobs and 11,700 jobs.
Proposal 1 is a remarkably clean cut to an economically inefficient tax. But the ads have oversold it, and the Truth Squad incorrectly certified the accuracy of those ads.