Michigan’s Phase Out of Industrial and Commercial TPP

6. Michigan’s Phase Out of Industrial and Commercial TPP

As a result of a referendum held on August 5, 2014, Michigan repealed industrial and commercial TPP taxes in the state ¹⁷ (Lowe, Zin, & Pratt 2014; Mughan & Propheter 2017). The approved ballot measure, which took effect on January 1, 2016, established several sources of replacement revenue, including

1. allocating a portion of the use tax revenue to local government units through the creation of a special fund to reimburse them; and 
2. imposing a new state tax on the exempt eligible manufacturing TPP called “essential services assessment” ¹⁸ (Low e, Zin, & Pratt 2014; Collins 2015).  

Property purchased between 2006 and 2012 will become exempt from TPP taxes once they become 10 years old (Mughan &  Propheter 2017). That is to say, such properties will become 100 percent exempt from TPP  taxes, at the latest, in 2023 (Collins 2015). Additionally, under the provisions of the legislation, firms with $80,000 or less in personal property in a taxing jurisdiction became immediately exempt from TPP taxes (Collins 2015). As opposed to Ohio, Michigan provided for a permanent tax revenue stream to make up for the lost revenue due to the tax cuts (Mughan & Propheter 2017). Nevertheless, the use tax is a more unstable source of revenue – in comparison with TPP taxes – which could create budget constraints for local governments (Mughan & Propheter 2017). Also, by 2023, state use tax revenue is expected to be reduced by more than $400 million (Collins 2015).

7. Concerns, Options and Potential Solutions →