GRAND RAPIDS, Mich. (WOOD) — Proposal 1 is being billed as a win-win.
For businesses, it would do away with an annual tax on equipment that keeps their factories and offices running.
And it’s a win for public services, like police and fire departments, because they wouldn’t lose any funding.
You have probably seen and have perhaps driven vehicles with components made by pouring hot metal into Styrofoam forms on the floor of Van’s Patterns.
“We’ve worked for Volkswagen out of Mexico, and we’ve made BMWs. About every car there is, we’ve made some part for it,” owner Dan Vander Molen said. “We’ve been doing it a long time. Been in business for 50 years.”
But like many businesses in Michigan, Vander Molen’s company paid the sales tax on the equipment on the plant floor, and has continued to pay it again and again and again.
“This machine here I’ve had for 25 years, and I’m still paying taxes on it.” Vander Molen said, pointing to a computer-aided cutting machine.
It and most every machine on the floor is subject to Michigan’s Personal Property Tax.
Unpopular in the business community but important to essential services, the Personal Property Tax (or PPT) also provides an annual check to local government for everything from police protection to schools.
But Michigan voters could soon end that practice.
Proposal 1 on the Aug. 5 ballot will ask voters to do away with the Personal Property Tax, an ancient and confusing levy businesses have long complained about.
It’s a tax most neighboring states don’t’ levy, which supporters of Proposal 1 say also puts Michigan at a disadvantage.
“As a consumer, if you were to go out and buy a lawnmower, and you bought that lawnmower and you paid taxes on it and you used it and it was valuable to you for the next 10 years. If you had to pay tax on it for those next 10 years, you would really consider hard whether you wanted to by that lawnmower,” Vander Molen explained. “And that’s what business owners do.”
Proposal 1 is the result of a bipartisan effort to end the tax, but still guarantee revenue from the PPT would be replaced. The bulk of that cash will be replaced by shifting dollars already collected through the state’s use tax, which is levied on purchases like those made by mail order or over the Internet, to local communities.
That adds up to about $3 million annually in the City of Kentwood’s case.
“It is consistent. It is growing,” said Kentwood Mayor Stephen Kepley about the PPT replacement. “There’s more stability in the use tax then in the PPT. So for local government, it actually is a more stable funding mechanism than the PPT is.”
Supporters of Proposal 1 say the end of the PPT could be a job creator.
There’s empty space on the floor of Vander Molen’s plant where another machine may go in the future. But the cost of doing business, including the PPT, has kept the space empty.
“If I buy a new machine, that’s three new employees. And so all these things go together to make me more competitive,” Vander Molen said.
24 Hour News 8 could find no organized opposition to the proposal.
But if the tax formula sounds confusing, then you’ve hit upon one of the biggest obstacles faced by Proposal 1 supporters: Getting voters to understand it.
The ballot language doesn’t help matters. It contains a lot of legalese and statutory mumbo jumbo. That’s why supporters have taken to the airways and websites to explain the bottom line.
The other obstacle is voter mistrust. A lot of people don’t trust politicians to do as promised, even though supporters say there are safeguards built into the ballot proposal.
But Dan Vander Molen has another politically-related reason to trust the promise.
“If you can get the two parties to agree on something, it’s usually a good thing,” he said. “I think that if people aren’t sure, they could look at that.”