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Mackinac Center for Public Policy
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2003 House Bill 4234: Allow personal property tax break for businesses
  1. Introduced by Rep. Glenn Steil, Jr. (R) on February 18, 2003, to exempt businesses from paying personal property tax (property tax on capital equipment) on property valued less than $5,000 taxable value. This is approximately $10,000 in market value. "Approximate" because taxable value is capped by the rate of inflation, so equipment which may have appreciated by a larger amount will not be taxed at the full market value. The so-called “personal property tax” is assessed on the tools and capital equipment used by a business, and is levied in the same manner as regular real estate property taxes.
    • Referred to the House Tax Policy Committee on February 18, 2003.
      • Reported in the House on February 26, 2004, with the recommendation that the substitute (H-1) be adopted and that the bill then pass.
    • Substitute offered in the House on April 1, 2004, to replace the previous version of the bill with one that incorporates technical changes. This version was subsequently superceded by another substitute with substantive changes. The substitute passed by voice vote in the House on April 1, 2004.
    • Substitute offered by Rep. Lorence Wenke (R) on April 1, 2004, to replace the previous version of the bill with one that only allows a business with gross receipts of $5 million or less to take the proposed exemption, and only allows the exemption for one of the firm's locations. The substitute passed by voice vote in the House on April 1, 2004.
    • Amendment offered by Rep. Chris Ward (R) on April 1, 2004, to establish the exemption at $7,500 as measured by its state equalized value. The amendment passed by voice vote in the House on April 1, 2004.
    • Amendment offered by Rep. Chris Ward (R) on May 13, 2004, to clarify that the tax exemption only applies if all of a firm’s personal property, including that of affiliates elsewhere in the state, is valued less than $7,500 as measured by its state equalized value.
    • Amendment offered by Rep. Bruce Caswell (R) on May 13, 2004, to allow local assessors to exempt businesses that have declared they have less than $7,500 in personal property (measured by SEV) from filing personal property statements for the next three years.
    • Amendment offered by Rep. Gary Woronchak (R) on May 13, 2004, to require the state to reimburse local governments and the school aid fund for any revenue they do not collect as a result of this exemption.
  2. Passed 59 to 46 in the House on May 13, 2004, to exempt a business from paying personal property tax (property tax on capital equipment) if all its business related property, including that of affiliates elsewhere in the state, is valued less than $7,500 as measured by its state equalized value, which is approximately half of the market value. The state would be required to reimburse local governments and the school aid fund for any revenue they do not collect as a result of this exemption. The so-called “personal property tax” is assessed on the tools and capital equipment used by a business, and is levied in the same manner as regular real estate property taxes.
    Who Voted "Yes" and Who Voted "No"

  3. Received in the Senate on May 18, 2004.
    • Referred to the Senate Finance Committee on May 18, 2004.
    • Reported in the Senate on June 8, 2004, with the recommendation that the bill pass.

Comments

Rep. Kolb's "no vote explanation"  by Admin003 on May 14, 2004 
Rep. Kolb, having reserved the right to explain his protest against the passage of the bill, made the following statement:

"Mr. Speaker and members of the House:

I voted no on House Bill 4234 because the bill would cause job losses across the state as local governments are forced to lay off more workers. As introduced, the Department of Treasury estimated HB 4234 could cost up to $125 million: $56 million from the School Aid Fund, and the rest from local governments. The cost of the current version is considerably lower, but still much more than the state, counties, and cities can afford right now. Even holding local governments harmless from the cost of HB 4234 simply shifts the burden to the state, which is already facing a billion dollar deficit.

Although supporters would argue that the bill will create at least as much job growth in the private sector, the Department of Treasury pointed out that a $7,500 exemption will mean an average tax savings of $390 ­ hardly enough to hire additional staff, or truly spur long-term economic growth.

Furthermore, this version is probably unconstitutional, because the state cannot create two different classes of personal property differentiated only by their value. Why should a business with $7500 worth of personal property pay no tax while a business with $8000 worth of property must pay tax on the entire amount?

For all these reasons, I voted no on House Bill 4234."


Reps. Hopgood and Dennis' "no vote explanation"  by Admin003 on May 14, 2004 
Reps. Hopgood and Dennis, having reserved the right to explain their protest against the passage of the bill, made the following statement:

"Mr. Speaker and members of the House:

I voted no on House Bill 4234 because the bill would cause job losses across the state as government is forced to lay off more workers. As introduced, the Department of Treasury estimated HB 4234 could cost up to $125 million: $56 million from the School Aid Fund, and the rest from local governments. The cost of the current version is considerably lower, but still much more than the state, counties, and cities can afford right now. Even holding local governments harmless from the cost of HB 4234 simply shifts the burden to the state, which is already facing a billion dollar deficit.

Although supporters would argue that the bill will create at least as much job growth in the private sector, the Department of Treasury pointed out that a $7,500 exemption will mean an average tax savings of $390 - hardly enough to hire additional staff, or truly spur long-term economic growth.

Furthermore, this version is probably unconstitutional, because the state cannot create two different classes of personal property differentiated only by their value. Why should a business with $7500 worth of personal property pay no tax while a business with $8000 worth of property must pay tax on the entire amount?

For all these reasons, I voted no on House Bill 4234."


Rep. Jamnick's "no vote explanation"  by Admin003 on May 14, 2004 
Rep. Jamnick, having reserved the right to explain her protest against the passage of the bill, made the following statement:

"Mr. Speaker and members of the House:

I voted against HB 4234. Having been a local treasurer before coming to Lansing, collecting the smaller personal property is difficult and sometimes impossible. Many of these businesses start on shoestring and have a difficult time establishing themselves. A more appropriate taxable value would have been $2500. The loss to our governmental entities would have been more manageable in these difficult financial times in our State."


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