Washtenaw County’s budget currently is about $96 million and it would lose about $5.5 million annually if personal property taxes were eliminated as the current Senate and House bill package have proposed.
“This would be a devastating impact,” Rutledge said.
There also has been talk of gradually reducing the personal property tax, he said, which would result in Washtenaw County losing $400,000 annually. However, he said, that amount would escalate and still would be a serious concern.
The county government already has cut staffing, reduced costs and done its due diligence eking out efficiency, Rutledge said. If personal property tax revenue is eliminated, he said, it will place the county in an untenable position.
Washtenaw County’s government has done an excellent job of balancing its budget within the current economic climate, he said, and has been responsive and responsible.
The Washtenaw County Board of Commissioners adopted a resolution April 4 asking the state Legislature to rethink repealing the personal property tax.
Commissioner Leah Gunn, who proposed the resolution, said the county will not be in good shape if the tax is repealed alongside the state revenue tax sharing trust fund drying up by 2013.
“This wouldn’t just affect county government … we’ve talked with other people in the townships and cities and we all agree that you can’t do this without promising to replace (the lost revenue),” Gunn said. “There’s no plan that we know of to replace it.”
Commissioner Alicia Ping opposed the way the resolution was written, but not the resolution itself.
She is in favor of eliminating the tax, but agreed with other commissioners that the hole in the county budget the repeal would cause needs to be addressed.
Commissioner Yousef Rahbi pushed for an amendment that was added to the resolution calling for a guaranteed funding replacement of 100 percent of the revenue entities receive from the tax if it’s repealed.
“The 100 percent replacement shouldn’t be 100 percent replacement revenue sharing where it depends on the state handing us a bunch of money,” Rahbi said. “We need options as local government to raise the money that we need to raise and not rely on the state government to say this year we’re going to fund you 35 percent and next year we’re going to fund you 20 percent.”
Gunn said she is less particular about where funding comes from as long as the budgets of the county and individual communities are made whole. She also is skeptical the state would increase local governments’ taxing power.
Cities can institute an income tax on residents, but only the state has the constitutional power to levy a sales tax or any consumption tax, leaving local municipalities not much else in the way of revenue generation under the current status quo.
Rutledge said he and his colleagues have been trying to think of an alternate source of revenue.
However, he said, he hasn’t been able to identify any option that wouldn’t burden residents with more taxes and hurt middle-class families, which he doesn’t want to see happen. Residents already are under financial strain, he said.
One idea Irwin said he’s had, to at least partially replace the personal property tax, is a tax on carbon emissions. It would keep the tax within the same sector and also work toward a public policy goal of reducing pollution, he said.
Irwin said he hopes there will be more discussion at the state level and more ideas will be adopted to replace the revenue.
However, he said, it’s still possible the package will be passed as is. Reassigning the $1.2 billion the tax generates statewide is a big job, he said, but an even larger amount was reassigned last year under Republican leadership, referencing a $1.8 billion tax cut for businesses that is incrementally becoming a burden on residents.
“Last year, it was done in a pretty big way,” he said. “That’s a huge shift in public policy.”
Irwin believes many residents are unaware of this, possibly since many changes don’t start until next year.
Senate bills 1065 through 1072 of 2012 are all parts of what Calley has called components of reforms to the personal property tax.
All these bills were passed by the state Senate and were referred to the Tax Policy Committee on May 10, after the first reading of the bills by the state House. No further action has been taken on the bills.
Senate Bill 1070 is a small parcel exemption that would make any commercial and industrial parcels with taxable value less than $40,000 exempt from paying the personal property tax starting in 2013.
This would help eliminate some administrative burden from collecting small amounts of taxes from small businesses, Calley said, and by getting lots of little parcels out of the system, it will be much more efficient to administer. It would get the majority of taxpayers out of the system, he said.
However, Calley said, it would create a cliff effect between businesses that would and wouldn’t qualify for the exemption.
The majority of personal property tax filings are for a small amount of money, Ouimet said. He said it would save the state money to reduce these filings, for example eliminating anything under $200.
Senate Bill 1069 would exempt all new and eligible personal property beginning in 2016. This exemption applies to property that was placed into service on or after Jan. 1. To be eligible, the property must be used for industrial processing more than 50 percent of the time.
“We’re trying to create a scenario where all industrial equipment and all processes that go into industry will be exempt,” Calley said.
Senate Bills 1065 through 1068 would allow existing abatements on personal property to run their course.
Senate Bill 1072 would establish a reimbursement fund to assist local governments. The Department of Treasury would be required to prepare an estimate of loss for each government entity beginning in the 2016 fiscal year.
House bills 4102 through 4105 of 2011 also would change the personal property tax if enacted.
They were introduced and had a first reading Jan. 18, 2011, and then were referred to the Tax Policy Committee.
Ben Baird can be reached at 734-429-7380 or email@example.com. Follow him on Twitter @BenBaird1. Staff Writers Sean Dalton and Krista Gjestland contributed to this report.
FOR THE WEB:
Link to a document, a map of PPT percentage by Michigan counties made available by the Replace, Don’t Erase Coalition, that I’ve posted on Scribd which can be embedded in the story online.
a title=”View Map of percentage of taxable value is from PPT by county in Michigan on Scribd” href=”http://www.scribd.com/doc/100467598/Map-of-percentage-of-taxable-value-is-from-PPT-by-county-in-Michigan” style=”margin: 12px auto 6px auto; font-family: Helvetica,Arial,Sans-serif; font-style: normal; font-variant: normal; font-weight: normal; font-size: 14px; line-height: normal; font-size-adjust: none; font-stretch: normal; -x-system-font: none; display: block; text-decoration: underline;”Map of percentage of taxable value is from PPT by county in Michigan/aiframe class=”scribd_iframe_embed” src=”http://www.scribd.com/embeds/100467598/content?start_page=1view_mode=listaccess_key=key-29k7weefgyokq1neuhya” data-auto-height=”true” data-aspect-ratio=”0.772727272727273” scrolling=”no” id=”doc_65946” width=”100%” height=”600” frameborder=”0″/iframe