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$75M Biz Property Tax Cut Passed As Part Of Economic Development Deal

December 21, 2021

The House and Senate sent to the Governor Tuesday evening a $75 million small business tax cut that emerged as a piece of the economic development deal reached Tuesday on the final day of legislative session in 2021.

Under the Senate’s reworked version of HB 5351, the cap on the “small taxpayer exemption” on paying the Personal Property Tax on commercial equipment was raised from $80,000 to $180,000, giving relief to some businesses but costing local governments more than $50 million a year, based on a Senate Fiscal Agency analysis.

The change came as a nod to small-and medium-sized businesses that aren’t going to benefit directly from the $1 billion economic development fund also created Tuesday. Senate Majority Leader Mike Shirkey (R-Clarklake) said Michigan needs these businesses to thrive if Michigan’s economy is going to thrive.

“If a healthy economy is a like a healthy garden, we need to water and nourish the entire garden and foster healthy competition. Our bipartisan work today does just that,” he said.

To compensate for the loss of revenue, lawmakers are putting $75 million into SB 82, the economic development fund supplemental for local governments. Going forward, Shirkey pledged to find a permanent funding solution for locals.

“I fully expect my colleagues, our local community leadership, and the public to hold the Senate’s feet to fire over the next 12 months as we work to devise a permanent funding solution. This solution will be creative and may not be limited to just the increase in the PPT exemption we undertook today,” Shirkey said.

In response to the deal, Gov. Gretchen Whitmer Press Secretary Bobby Leddysaid the Governor is going to put “Michiganders first in every decision as she works to get things done for our state.”

He said the deal shows the Governor can bring everyone together to find common ground on the things that matter to people, whether that’s the auto insurance reforms or this economic development plan.

“We will continue to work with anyone who wants to work with us because the entire state wins when we work together,” Leddy said.

The Senate passed HB 5351 on a party-line vote. The House vote was 58-45, with Reps. Kevin Hertel (D-St. Clair Shores), Sara Cambensy (D-Marquette), Karen Whitsett (D-Detroit) and Angela Witwer (D-Delta Township) voting with Republicans in support. Rep. Jeff Yaroch (R-Richmond) joined Democrats in voting no.

The Rep. Steven Johnson (R-Wayland Twp.) bill received stiff opposition from local governments and legislative Democrats, who were leery about their communities truly being compensated for the projected loss of revenue.

Sen. Jeremy Moss (D-Southfield) said this could impact “essential services,” such as public safety and community infrastructure projects.

“This funding pays for things that we depend upon. Our residents who pay taxes depend on police and fire to show up when there is an emergency, so do – I presume – the businesses too, who pay this tax,” Moss said. “By repealing this tax in perpetuity with no replacement to local communities beyond the first year, you are directly defunding the money that goes toward public safety.” 

He said the timeline to rush the legislation through Tuesday was not a sign of good policymaking, urging lawmakers to return to the table and figure out how to make up the funds that would go missing from the Local Community Stabilization Authority, the School Aid Fund and overall local property tax revenue. 

Sen. Ruth Johnson (R-Holly) said she respected the legislation “only because I’ve been given solid commitments that this body and our colleagues in the House will work to address the loss in revenue” that would affect local units of government and public schools if the bill is signed into law. 

“I would prefer that we have the solution in hand today, but I understand this is not the case,” Johnson said on the Senate floor. “So, I’m supporting this bill today to provide tax relief for our state’s small businesses who have suffered disproportionately during the COVID-19 pandemic and also to attract new entrepreneurs to Michigan.” 

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