CURT FINCH: Be wary of changes to the Personal Property Tax
By Curt Finch
Mecosta-Osceola Intermediate School District Superintendent
As the “lame duck” legislature moves to quickly push legislative packages through in the coming months, the public must be ready to respond to last-minute measures – especially since the party in power lost more seats, making the margin of error more difficult to overcome. One of those devastating impacts on schools would be the change and non-replacement of the Personal Property Tax. This is a tax on industrial, commercial and utility properties’ equipment that is locally paid, collected and spent on local services. Although the public needs to encourage a strong business environment, we must also balance it with support of our local governmental, social and educational systems.
Although the explanation of its impact may be slightly confusing, let’s take a stab at it! When school districts, libraries and local governments issue capital bonds to build facilities, the PPT is one of the tax revenue sources that help repay those bonds. If the PPT is reduced or eliminated, the borrower is legally obligated to pay back the bond, and therefore, must raise the local millage collection to meet the obligation. Since local millage rates have gone down for schools the past 10 years (mainly no new construction), it will be a shock to local taxpayers when their homeowner tax bill jumps overnight to make up for the lost PPT revenue! Another example is the operational side of the Mecosta-Osceola Intermediate School District’s Special Education and Career Center programs; the MOISD would have to cut more services to local school districts and/or pass the cost back to them.
If there isn’t a guaranteed replacement for the PPT, the legislature will make every attempt to divide and conquer. Their first trick to quiet schools, libraries and local governments will be to “require” the next legislature to pay the bill – something they cannot legally do. One legislature cannot dictate legally binding budgeting “suggestions” on to the next group. They can write it, but it isn’t worth the paper it’s written on! Everyone wants lower taxes until their house needs a fireman, the roads are falling apart, their business needs protection and/or their children or relatives are in school. Pushing the tax “break” from business to local taxpayers is nothing new; this legislature has made it a habit of rearranging dollars to favor business without any requirements for creating jobs – two years ago it was almost $2 billion and our unemployment numbers continue to creep up!
PPT has its faults. Many of our Midwest neighbors have moved to different systems of securing resources for local government and service agencies; only Michigan is entertaining elimination! We need to check with our neighbors first before we just eliminate the PPT and pray it works. The local impact to our school districts alone will be over $600,000 and over $1 million to the MOISD, every year. Most of these taxes would automatically pass to the local residents to keep those services. Make sure your legislator knows that you’ll be keeping an eye on them during the lame duck term. Changing something as complex as the PPT needs bipartisan work and an eye on the future. Although elimination is less messy, the unintended consequences will be worse!
Your homework for the next two months? Keep your eye on Lansing for PPT changes. Ask your legislator if they are going to guarantee the replacement of the PPT dollars for our local schools, libraries and local governments. The PPT is an important lifeline for the social structures in our two counties.
Dr. Finch can be reached at email@example.com and followed on Twitter at CFinchMOISD