LANSING -- Republican lawmakers have long wanted to get rid of a tax on equipment they say is keeping manufacturers from hiring more workers but have been held back by the question of how to replace the money that local governments, libraries, and school districts would lose.
Now they think they have a solution: Replace about 80 percent of the money lost with funds the state is expected to receive as tax credits expire for companies such as battery producers.
But many local officials don't trust lawmakers to make up the lost funds. They point out that the state plans to spend 26 percent less on revenue sharing in the next fiscal year than it did a decade ago.
State revenues have been diverted to other priorities during the decade-long economic crisis. The Michigan Municipal League estimates the cuts cost local governments $4.2 billion between fiscal 2001 and fiscal 2011, causing them to reduce police and fire services and cut other personnel. School districts are getting 3 percent less annually than they did a decade ago, and libraries have lost nearly $10 million in state aid over that period.
The money from personal property tax collections goes directly from businesses to local entities.
For cities, school districts, and libraries whose tax base includes several manufacturers, rolling back the tax could mean having to trust the state to replace a third or more of their annual budgets.
A coalition of local officials says a constitutional amendment should be passed requiring the state to make sure cities, school districts, and libraries get most or all of the money they're getting now.
"Under the Senate bills, the Legislature and governor would basically take hundreds of millions of local tax revenues from local communities and schools and give future legislatures and governors new powers to keep the money or decide if any of the funds are ever returned to local communities and schools," said Dan Gilmartin, chief executive officer of the Michigan Municipal League. "Local taxpayers deserve a legal guarantee, a constitutional amendment, that the funds are going to be replaced."
Manufacturers argue that they're paying more in taxes under the corporate income tax pushed through last year by Gov. Rick Snyder and GOP lawmakers and need relief. Many large manufacturers got tax breaks under the Michigan Business Tax that no longer exists. So even though business tax revenues are dropping by $1 billion this fiscal year and should drop by $1.8 billion next year, some companies aren't benefiting.
They say eliminating the personal property tax is one way to lower their costs. "The manufacturing equipment tax is a $400 million barrier to economic growth in Michigan," Mike Johnston vice president of the Michigan Manufacturers Association, said recently.