by James M. Hohman
Mackinac Center for Public Policy
July 07, 2014
The referendum Proposal 1 is a modification of Michigan’s personal property tax, which is levied on business equipment and machinery. By taxing business equipment and machinery, it discourages businesses from investing in expansion and growth. The legislation that would go into effect if Proposal 1 were approved by voters creates three new exemptions for certain businesses that are currently subject to the personal property tax; it does not eliminate the personal property tax. The exemptions apply to small businesses and manufacturers and amount to an estimated $600 million cut when fully implemented. To offset the lost revenue, Proposal 1 calls for a portion of the statewide Use tax revenue to be set aside for the reimbursement of local governments.