Gov. Rick Snyder: Personal property tax reform in Michigan could take 5 to 10 years
Michigan Gov. Rick Snyder said today it could take up to a decade for the state to tackle personal property tax reform — an issue that has local governments worried they could lose millions of dollars in revenue if the tax went away without replacement funding.
"It's a very difficult question," Snyder acknowledged during an interview with AnnArbor.com's editorial board this morning. "The way I view it is, I don't want the state to just come out and tell people what to do. This is where we need a good dialogue."
Snyder has made known his intentions of exploring whether Michigan can cut $1.2 billion in personal property taxes — the tax that businesses pay on equipment ranging from computers to machinery. He said today the reason it's on his agenda is because it's holding Michigan back from being competitive and creating jobs.
Angela Cesere | AnnArbor.com
Snyder said he plans to have a working group — with local communities involved — address the issue collaboratively, and that could take time.
"If you notice this compared to our other initiatives, we don't have a set timetable to say 'here's a proposal and this is what we're going to do,'" he said, suggesting it'll likely take years to fully address. "This is a solution that could take five to 10 years to implement because of the importance to the local pieces and the replacement cycle.
"In a lot of ways, it's almost letting some of the tax run off or run down by either excluding new property or letting it wind down while a replacement comes in and addresses it."
Local governments and schools say they want a guarantee that revenue coming to them from personal property taxes doesn't evaporate.
In Washtenaw County, eliminating personal property taxes could mean the loss of $45 million to $50 million, including $6 million used to run county government, Raman Patel, the county's equalization director, told AnnArbor.com earlier this year.
Some local officials are calling for a constitutional amendment that would identify the replacement revenue and earmark it for cities and schools.
Asked whether it could be cost-neutral, Snyder said he's hopeful a solution could be reached that would achieve "relative neutrality."
"Our goal here is to make it so our local jurisdictions can be successful while we address this problem," he said. "So in many respects, one of the things, if we could achieve it, is relative neutrality in terms of that whole process. And that's because, again, there are so many instances, you can't say you're going to make sure everyone's OK."
What makes it a particularly tough issue to address, Snyder said, is that there really is no one-size-fits-all solution that works for every local community.
"You can go to some communities where the personal property tax is not a major portion of their tax base," he said. "It may be single-digit percentages and it's spread across a broad business community in terms of a lot of different payers.
"And then you'll find other communities where a personal property tax accounts for more than 50 percent of the revenue for that community — it is the primary revenue source," he said. "And in most of those instances, it goes back to one particular facility or a handful of facilities."
Snyder said there are two areas he wants to focus on as far as personal property tax reform, and that includes differentiating between commercial and industrial properties.
"I want to put more priority on the industrial side over the commercial side, because if you look at the most important piece of the job creation message, it's more on the industrial side," he said. "If we're looking at major industrial projects that tend to be the higher multiplier in terms of job creation, you put more priority on that."
Snyder said he also wants to look at possible "earlier pieces" of personal property tax reform that could be implemented sooner rather than later. He suggested that could include cutting out the "low-dollar, high-volume piece of this" from the taxpayer base.
"There are people out there (for whom) this is more a nuisance tax than anything," he said. "It is just an obnoxious tax and the administrative cost of collecting is pretty obnoxious, because you're hitting a lot of people for $100, $200, $300. And they're filling out forms, and you've got somebody reviewing all these forms for a relatively small amount of revenue."
Snyder said he's hopeful the state can work with local communities on some sort of replacement for those low dollar amounts.
"They could take out potentially half or more of these taxpayers and just get them out of the system and then focus in longer-term on the real problem areas," he said.
Snyder acknowledged he's not sure the state will be able to solve the issue for every local jurisdiction, though.
"Just because some of these have, again, one facility that accounts for most of their tax base," he said. "To say there's a permanent solution from the state to replace all of that, I'm not sure how viable that is. We need to do more homework."