Traverse City Record-Eagle

Michigan

February 24, 2014

Deal assures cities not hurt by business tax cut

LANSING (AP) — Lawmakers this week will propose and begin passing a deal to guarantee that local governments lose little to no revenue from a planned phase-out of taxes on industrial machinery and small businesses’ equipment.

The business tax cuts were enacted by Gov. Rick Snyder and legislators at the end of 2012 but will be halted if a statewide vote fails in August. The agreement reached among the administration, business interests and local officials would essentially make sure cities, counties and townships opposing a loss in revenue are mostly kept whole.

It would all but ensure that the ballot proposal faces no organized opposition.

“It’s far better,” Larry Merrill, executive director of the Michigan Townships Association, said of the 10-bill package to be introduced Tuesday in the Senate.

Under current law, local governments will be fully reimbursed for lost tax revenue that pays for police, fire, jail and ambulances. Yet 80 percent of revenue used for other services is expected to be replaced.

The legislation — which would compensate local communities in full beginning in 2016 — will be voted out of the Finance Committee on Wednesday, said Chairman Jack Brandenburg, a Republican from Macomb County’s Harrison Township. The bills must be done by the end of March because they would change the ballot question, he said.

When the tax cut won approval 14 months ago, Brandenburg said, there was concern in the business community and within Snyder’s administration that voters might reject eliminating what critics say is an onerous and obsolete tax on machinery and other business equipment because of worries about budget cuts. Local governments bore steep cuts in revenue-sharing payments from Michigan in the 2000s as sales tax collections lagged and legislators siphoned off money to deal with state deficits.

“We were put on notice by all the municipal groups that they would fight this thing tooth and nail,” Brandenburg said. “Now there should be no aggravation from anybody.”

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