Source: Sherman Publications

Guest Opinion
Concerns expressed over idea of nixing personal property tax

January 18, 2012

By Dave Bailey

Oxford Village resident

In October 2011 some press coverage of this initiative (not in the Oxford Leader) caught my eye since it did not explain up front in the article just what the Personal Property Tax is, and how it is levied. Now on January 11 I see a piece in the Leader by James M. Hohman which concerns me for a different reason. I will comment on Hohman’s piece at the end of this piece.

First concern: I have asked some members of the general public to tell me about their perceptions of the Personal Property Tax. They all say it is levied on persons. When I ask them whether they themselves pay it, they shrug their shoulders. When I ask why they are not paying it, they guess that they don’t own anything really valuable. These misperceptions extend to some people who might be expected to know better, such as one person I spoke with, a college senior at a good Michigan private college who is interested in government. She didn’t know.

Given that the general public is so uninformed, should not the media explain the basics to them? Isn’t that what we expect the media to do, at a bare minimum, when the public is uninformed?

Let me repeat that this complaint is not directed at the Leader. The January 11 piece does tell what the Personal Property Tax is, namely, a tax not on persons or on the property of persons but on businesses. .

Second concern: Should the Personal Property Tax be repealed, every municipality in Michigan will lose revenue, unless some action is taken. In many cases, the revenue losses will be large. In good times, the losses might be manageable, but these are not good times. Tax bases have been declining for some years, and any prudent planner should anticipate further declines. An immediate economic turnaround would be a pleasant surprise, but we shouldn’t count on it.

What the prudent planner might not have anticipated, is the present initiative to eliminate the Personal Property Tax. Coming as it does after the lean years of depression, oh I’m sorry, I meant to say recession... —anyway, for the already hard-hit municipalities, the impact of PPT repeal would be like a defender piling on after the tackle. No fair!

Third concern: In response to a repeal, municipalities can do some things to minimize the hit. But available options will vary.

The first thing which might occur to a city council or other local legislative body, is to raise the millage enough to maintain the revenue stream at or close to pre-repeal levels. This strategy has two problems at least:

In almost all municipalities the greater part of the new revenues must come from the residential taxpayers, not from the previous payers of PPT. The residents should understand and sympathize with their council members, who are just responding, as best they can, to trouble coming from Lansing. But many will not understand.

Some municipalities are already maxed out on their millages. In those localities, the officials and/or the voters might feel resentment, since the state legislators had changed the rules on them. And since they are maxed out, they feel helpless as well as resentful. To be fair, shouldn’t the Lansing folks include in the PPT repeal bill an increase in the maximum millages which the various types of municipalities may levy? That way, those maxed-out municipalities which want to maintain their levels of service would have a legal way to do it.

Another option for councils to consider is of course to reduce services. To be fair, they should reduce or eliminate those services which were provided to the previous payers of PPT. If that could be done exactly, the residential taxpayers would not suffer at all. But in the real world, most services are provided to all, including to the innocent residents, who therefore would suffer. However, I am sure that something could be arranged along these lines.

Additional options doubtless exist. I shall not attempt to list them all.

Fourth concern: Municipalities with bonds outstanding would be pushed closer to default. Council members would need to decide whether to default on their bondholders, or default on their residents by eliminating service. Perhaps we would then find out who their true constituency really is. Do bondholders vote?

Fifth concern: The initiative, if passed and responded to by the councils, would transfer wealth from the class of homeowners to the class of those who presently pay PPT. For that reason, it may appear to some voters as an act of class warfare, an act of war in other words. I won’t go into my reasons for wanting to avoid that happening.

What can be done, and what should be done?

These are two different questions. For example, it could be argued that nothing should be done. Let the state legislature enact the PPT repeal. Then, after the inevitable consequences take place, vote the foolish legislators out of office, and replace them with wiser ones. We in Michigan would end up ahead of the game, since PPT is but one issue, and wiser legislators would favorably impact all the issues.

If you don’t want to wait through several election cycles, then you might alter this plan a little. Do nothing, and then recall the foolish legislators. This is faster, but it won’t work unless the governor is recalled first.

I do not support either of these strategies. It would be better to oppose, up front, the passage of any bill that would repeal the Personal Property Tax. That way the municipalities would avoid even a temporary loss of revenue, and they would be able to continue their services to individuals and corporations without interruption. Later, if opposition to the bill should fail, and PPT is actually repealed, then one of the other two strategies could be used.

Sixth concern: In the title of his Leader column, James M Hohman used the phrase “without replacement”. Surely he must realize that if the PPT were to be abolished, many municipalities would want to do just that, namely, replace their lost revenues. I take offence at Hohman’s “without replacement” suggestion. The Village of Oxford, in which I serve as an elected official, has a Charter, granted to us by the State of Michigan. The Charter gives the village the power to levy a millage. Any attempt by Hohman, or by state legislators, to interfere with the powers granted to the village in its Charter, is an attempt to interfere with the Charter itself. The Charter of the Village of Oxford is our equivalent of the Constitution of the United States of America. I support and defend both. Mister Hohman, leave our Charter alone!

Dave Bailey serves on the Oxford Village Council.