Cut to PPT Has Minimal Impact on Schools

Portions of this article reproduced with permission from the Michigan Association of School Boards (MASB)

After months of objections from schools and local governmental units to proposed cuts to the personal property tax, a last minute compromise turned opponents into allies and a flurry of activity ensured as supporters of the agreement scrambled to rally support for the bills in the waning hours of the lame duck session.

Although the total revenue loss could have impacted schools significantly, negotiations resulted in an agreement to completely restore funding losses for school bonds, the school aid act, and all ISD funding. Sinking fund losses due to PPT are the only revenues not fully reimbursed, but they will be replaced at 80% and the impact is not expected to be huge.

House Bills 6022, 6024-26, and Senate Bills 1065-71 eliminate the personal property tax for all industrial and commercial personal property owners that have less than $40,000 in taxable value, exempting nearly 2/3 of all business owners from the tax. A complete phase out of the industrial portion of the tax will begin in 2016 and continue until 2022.

The mechanism to reimburse both schools and local units of government is tied to a new entity that is called the metropolitan authority. This authority is tasked with distributing funds collected from Michigan's use tax to each local unit based on the amount of personal property tax taxable value they have in 2013. A statewide vote will be required to transfer the use tax to the metropolitan authority in August 2014. One of the big battles of the day was getting the cut in the personal property tie barred to the passage of the statewide vote. This had been an item of contention with the business community, but in the end the tie bar was adopted.