What is Proposal 1 All About?

Proposal One Ballot Language 

“APPROVAL OR DISAPPROVAL OF AMENDATORY ACT TO REDUCE STATE USE TAX AND REPLACE WITH A LOCAL COMMUNITY STABILIZATION SHARE TO MODERNIZE THE TAX SYSTEM TO HELP SMALL BUSINESSES GROW AND CREATE JOBS.

The amendatory act adopted by the Legislature would:
1. Reduce the state use tax and replace with a local community stabilization share of the tax for the purpose of 
modernizing the tax system to help small businesses grow and create jobs in Michigan.
2. Require Local Community Stabilization Authority to provide revenue to local governments dedicated for local 
purposes, including police safety, fire protection, and ambulance emergency services.
3. Increase portion of state use tax dedicated for aid to local school districts.
4. Prohibit Authority from increasing taxes.
5. Prohibit total use tax rate from exceeding existing constitutional 6% limitation.
Should this law be approved?
YES [ ]
NO [ ]”

Lansing, Mich. (WILX) It's supported by Republicans and Democrats, small businesses and manufacturers and cities and townships.

It's known as Proposal One and it will be on the ballot during the Aug. 5 election. But even without an organized opposition, a poll from the Public Sector Consultants group shows 42 percent of people are either neutral or unsure of how to vote.

"At the moment there is no organized opposition to Proposal 1, except maybe confusion and apathy," said Jeff Williams, the CEO of Public Sector Consultants. "In general when voters do not understand a ballot question, they tend to vote no."

In order to understand Proposal One, there are a few things to understand.

Background

The Personal Property Tax, or PPT, has been criticized by both sides of the aisle and Gov. Rick Snyder as excessive, unfair and even "dumb."

Every business supply -- be it a computer, a copier or even a desk chair -- falls under the PPT. Businesses have to pay an additional tax every year they own the piece of equipment -- that's on top of the sales tax paid when it was purchased.

Through a 10-package bill, the legislature decided to repeal the PPT, but for it to happen, the voters must approve Proposal One.

Disadvantages of the PPT

For many companies, computers and other machinery are replaced frequently. For others, such as General Motors and Ford, parts can last decades.

"If you're Ford or General Motors and you bought a die 20 or 30 years ago that's still in service, that means you've paid tax on that $1 million or $2 million or $5 million dollar piece of equipment every year for the last 20 years," said Williams.

Supporters say the PPT can drive businesses out of Michigan and keep new businesses from building, since other states don't have a PPT at all.

"It tells a lot of companies, 'don't come here and build your factory here because you're going to have a tax on your machinery every year,'" said Sen. Rick Jones (R-Grand Ledge). "By getting rid of this, we hope that this will make a much better atmosphere for jobs to come to Michigan. That's really the goal."

Public Sector Consultants estimates businesses will save about $500 million a year as the tax is phased out, which will theoretically allow businesses to hire and spend elsewhere.

Benefits of PPT

The tough thing about getting rid of the PPT, according to Lansing Mayor Virg Bernero, is that it does give some aid to the cities.

Municipalities get a cut of the PPT pie -- for some it accounts for 10-25 percent of their budget. Lansing receives $3 million, some of which is used for the police and fire departments.

"Even though the PPT is a lousy tax, it's a tax that can be anti-business and anti-jobs, it's vital revenue for cities," Bernero said.

Proposal One is designed to make up for the money cities, townships and villages would forfeit due to the repeal of the PPT.

The Use Tax

The Use Tax is paid in lieu of sales tax, most commonly on hotel rooms, telephone calls, equipment leases and used car sales that don't go through a dealer, Williams said.

If Proposal One passes, the state will reapportion -- not increase -- part of the use tax and send it the way of the municipalities.

So, to review, Proposal One:

  • Ushers out the Personal Property Tax

  • Reallocates money from the Use Tax to municipalities

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