Which Way To Vote On Proposal 1 ?

[+Malamute]

They receive more, but do not fully reimburse the tax to municipalities,... only partially.

[FranksHotPeppersAndMarijuana]

Yes partially via the use tax. The rest can come out of the general fund that will be strengthened by the huge reduction in tax credits due to repeal of the PPT.

[FranksHotPeppersAndMarijuana]

That is a fair way to tax a business. They shouldn't be taxed at a flat rate on equipment (PPT) they should be taxed on income. A small business that barely makes it by is forced to pay a tax on a piece of equipment at the same rate as a big business that turns great profit. Just like the graduated income tax a business should be taxed partially on its ability to pay not on the value of equipment. If I am a business that installs spray-on truck bedliners and I turn very little profit in a particular year I still have to pay the same tax on the same equipment that a big company like GM pays. GM has the benefit of market share and maybe turns out 10,000 spray-on liners a year with the same equipment that the small business uses to do maybe 1000 aftermarket spray-on liners. But both companies pay the same PPT on the equipment. Then, since GM pays more taxes due to volume it is also able to receive the full benefit of a PPT tax credit on the equipment whereas the small business owes less in taxes and maybe recaptures less in the way of PPT tax credits than it actually paid in PPT. Do you get it now? Obviously bed-liner equipment isn't a good example because I don't think GM does spray-on liners but you get the idea. Plug in any piece of equipment to the equation that a small business owns that is also owned by big business and you have the same result. Fair tax? According to you and everyone else yes.

[+Malamute]

So your position is that this is merely a money grab by the state against municipalities and businesses will pay exactly the same amount of taxes?

 

 ;-)

 

 Just trying to nicely move through this topic with specifics.

[FranksHotPeppersAndMarijuana]

It isn't a money grab because the state is still responsible for part of essential services just like they are partially responsible for paying for local court operations. So in the end the state still pays. But it is more fair to businesses and also more fair for all municipalities. Acting as though the money will be there one way or another so let's keep the PPT in place ignores the fact that where the money comes from is part of the issue and the other part is local control of the money in some municipalities versus others.

[Wild Bill]

The tax credits disappear with the PPT repeal. So while businesses no longer pay the PPT they will pay MORE in income tax. Geez Louise, am I just spinning my wheels here?

 

Why will they pay more income tax, will their accountants all quit?

 

There are numerous ways businesses get around paying income tax. The easiest of which is to not show a profit.

 

Tax bill too high? Throw a company picnic, give a few bonuses, donate something to a charity and . . .

"Oh look! I didn't make a profit after all!"

 

The only thing I didn't like was that I wasn't able to write off more than I actually made.

 

I once worked for a company that sold machinery. The orders were taken by a subsidiary company who would do all the engineering and research for the machine. They then ordered the machine from the parent company. The parent then built the machine and sold it to the subsidiary at a very low profit margin.

 

The subsidiary would then sell the machine to the customer, but AT A LOSS!

 

How can this be? All their profits disappeared into "research and development", all on paper.

 

The parent companies profits disappeared due to operating expenses and overhead. (The owners wives owned the building and the company paid inflated rent to them. I'm not sure what tax dodge the wives used but I'm sure they had something.) The owners gave themselves a 1 million dollar bonus each at Christmas further reducing company profits.

 

Money goes from one pocket into the other and the tax bill gets smaller and smaller.

 

This is what Comrade Romney was referring to when he said people didn't respond to tax cuts because they didn't pay taxes anyway.

 

By the way, I'm fully in favor of getting rid of the tax, I just don't want it replaced with something else. Especially an unnamed something else.

 

 

 

ps Yes, I think we're all just spinning our wheels.

Edited August 7, 2014 by Wild Bill

[Restorium2]

The state coffers will receive millions more due to no more PPT credits.

We are supposed to believe that just because you say so?

 

Businesses with machinery of substantial value will be paying less tax now. We know that. The rest is all 'maybe this, maybe that'. The Hedlee amendment was enacted to stop this happy horsecrap. The PPT was put there to diversify the way taxes are collected: Some collected for income, some for business real value. Now this proposal limited that diversification.

Edited August 7, 2014 by Restorium2

[+Malamute]

Yes... "essential services", but not non-essential(which most would consider snow removal and many many others things essential), sinking funds and recreational fund losses.  Everything else is rehash.

 

We all know those issues will lose funding.  The state will not pay for that. Municipalities will have to either increase revenue or cut services such as snow removal(just for an example) and funding debt vehicles(sinking funds).

[+Malamute]

I mean,... with the slow degradation of bond securities that are based on Sinking funds,  caused by Sinking fund funding lowering(say that a few times) which will now likely be less, or revenue will be raised elsewhere, thus costing the average citizen more in the long run.

 

The best bonds are those backed by Sinking funds is what I am saying, and said reduction in PPT money will cause municipalities to typically not use that vehicle as much thus creating either less demand or higher borrowing rates.

 

 I dunno.... like I said... 3 years and 1 month from now, I will gladly revisit this issue and claim my correctness or admit my flaw. :-)

[FranksHotPeppersAndMarijuana]

Wild Bill it isn't that easy.  You don't get dollar for dollar credit for throwing a picnic or donating to charity. Just like personal income tax there is a cap on how much you can donate and get credit for and even then you aren't getting even 50% credit for it generally. So if you are going to have $100,000 profit and you think that donating that all to charity will reduce your tax liability to zero you could be wrong. If you (the business) owes or pays $100,000 in taxes you could end up getting $50,000 credit for the donation and still end up owing $50,000. That means you donated $100,000 and get half of that in credit towards the $100,000 in taxes owed. That means in the end you are paying $150,000. Strange way to get around taxes unless you genuinely want to donate money to charity.

 

The same with your company picnic. You can get a deduction of up to 50%. So if the picnic cost you $10,000 you may get a $5000 deduction. Again, a good thing if you are wanting to throw a company picnic but hardly what a money grubbing person would do because if you kept the $10,000 your tax rate wouldn't eat up half of that.  So it may be technically getting around paying taxes on that but it by no means is you getting free money.

 

Odd that a company owner would give themselves a $1 million bonus to reduce business profit. Do you realize that they are in a higher percentage tax bracket paying personal income tax on that than the company would if it realized that much profit? That isn't a tax dodge that is simply giving your money to uncle sam. Their tax attorney or accountant should be fired. They would pay 5.6% more tax on that 1 mil by doing that than they would if the company realized profit. That's $56,000 more in taxes. That is one large tax dodge backfire.

 

The scenario you describe with the research and development seems a bit unreal and highly unlikely. Even though subsidiaries keep separate books from the parent they have to file a consolidated financial statement and they are treated as one single entity by the IRS. This is the case if the parent and sub are closely held or public corporations. In fact it is even the case when The parent company holds a simple controlling interest (51%) in the sub.  That scenario wouldn't benefit the parent or the sub at all due to how they are treated by the IRS.  And if it is a publicly traded corporation you would have some pretty peeved stockholders when they received no dividends. If that scenario really happened then they better hope it never comes to the attention of the IRS because someone would be sitting in prison for a long time. If it is publicly traded (as most of these entities are) then you would have the SEC creeping around and looking to lock up some people too.

 

No Restorium2 you aren't supposed to believe it because I say so. I encourage you to research the taxing scheme and see for yourself. You will see how much of the PPT was allowed to be credited on the income tax. Easy peezy. When you don't pay PPT that means no more PPT credit on your income tax.

 

Malamute, snow removal is a responsibility of MDOT and your local road commission. They use funds that are received for road maintenance. Road maintenance funding should come through road related taxes as I have already stated.  That way those who use the roads the most or wear them out the most end up paying the most. Simple math.

Edited August 7, 2014 by FranksHotPeppersAndMarijuana

[Restorium2]

No Restorium2 you aren't supposed to believe it because I say so. I encourage you to research the taxing scheme and see for yourself. You will see how much of the PPT was allowed to be credited on the income tax. Easy peezy. When you don't pay PPT that means no more PPT credit on your income tax.

Personal Property Tax Reductions and Related Michigan Business Tax Credits
Personal Property Tax Reductions
Industrial personal property is exempt from the 6 mill state education tax and is also exempt from up to 18 mills levied for school operating purposes.
Commercial personal property is exempt from up to 12 of the mills levied for school operating purposes.
Additional MBT Credits Available Based on Eligible Personal Property Taxes Paid
A taxpayer may claim a credit against the MBT equal to 35% of the eligible industrial personal property taxes paid.
For tax year 2008 only, a taxpayer may claim a credit against the MBT equal to 23% of the eligible state assessed telephone personal property taxes paid under Public Act 282 of 1905. For tax year 2009 and subsequent tax years, a taxpayer may claim a credit against the MBT equal to 13.5% of the eligible state assessed telephone personal property taxes paid under Public Act 282 of 1905.
A taxpayer may claim a credit against the MBT equal to 10% of the eligible utility personal property taxes paid.
The various personal property tax provisions replace the current 15% credit for taxes paid on industrial personal property.

[FranksHotPeppersAndMarijuana]

So now you see it. The lost tax credits plus the increased use tax magically equal the revenue lost to the PPT repeal. Good job restorium2.

[Wild Bill]

Wild Bill it isn't that easy.  Yes it is. I did it for years. The trick is to have enough receipts of one kind or another to show the taxman and you're golden. I even used to pick up gas receipts that people left in the pump.

 

The same with your company picnic. You can get a deduction of up to 50%. So if the picnic cost you $10,000 you may get a $5000 deduction. Again, a good thing if you are wanting to throw a company picnic but hardly what a money grubbing person would do because if you kept the $10,000 your tax rate wouldn't eat up half of that.  So it may be technically getting around paying taxes on that but it by no means is you getting free money.

 

You don't get free money you just chip away at your tax bill a little at a time until it is substantially reduced. I would much rather spend the $5000 on my employees than let the government get it.

Assuming everything you purchase actually ends up at the picnic. (or if you even purchased it for the picnic, all you need is receipts)

One could even pay the employees with steaks instead of a payroll check for that week. Tax free income for them too!

 

Odd that a company owner would give themselves a $1 million bonus to reduce business profit. Do you realize that they are in a higher percentage tax bracket paying personal income tax on that than the company would if it realized that much profit? That isn't a tax dodge that is simply giving your money to uncle sam. Their tax attorney or accountant should be fired. They would pay 5.6% more tax on that 1 mil by doing that than they would if the company realized profit. That's $56,000 more in taxes. That is one large tax dodge backfire.

 

There is no higher tax bracket than the one they were in. I saw the bonus checks with my own eyes so I know that they did it. What makes you think that they don't have tax shelters for their personal income? They may have deposited those checks in their offshore accounts.

 

The scenario you describe with the research and development seems a bit unreal and highly unlikely. Even though subsidiaries keep separate books from the parent they have to file a consolidated financial statement and they are treated as one single entity by the IRS. This is the case if the parent and sub are closely held or public corporations. In fact it is even the case when The parent company holds a simple controlling interest (51%) in the sub.  That scenario wouldn't benefit the parent or the sub at all due to how they are treated by the IRS.  And if it is a publicly traded corporation you would have some pretty peeved stockholders when they received no dividends. If that scenario really happened then they better hope it never comes to the attention of the IRS because someone would be sitting in prison for a long time. If it is publicly traded (as most of these entities are) then you would have the SEC creeping around and looking to lock up some people too.

 

I may used subsidiary incorrectly. They were in the same building, but I don't know for sure if they were wholly owned by the parent or if they were a separate entity. Not publicly traded, a family business. Everyone in the family gets a check whether they work or not.

 

With creative accounting, legitimate transactions and a lack of conscience goes a long way when doing your taxes.

It's easy once you realize that you have no obligation to the Government. Had they asked I would have declined in getting involved in their "government" scheme. They apparently just assumed that I wanted to be controlled by them when I was born.

 

Do you think I could make this crap up?

[+Malamute]

Municipalities pay for their own snow removal. MDOT does main roads.  I think people care about the snow in front of their house. Heh. ;-)

[+Malamute]

Frank,... it does not equal up for municipalities.  That is the whole point.

[FranksHotPeppersAndMarijuana]

Wild Bill everything you are talking about is illegal.  As for the million dollars you are mistaken about the tax brackets. The tax for personal income tax is 39.6% if you make a little over $400,000. The tax on business income over $335,000 is 34%.  Putting the money in an account overseas and not paying taxes on it is illegal. That would definitely be found out as there would be one heck of a paper trail.

 

Basically what you are saying is the company was engaging in massive tax evasion.  Illegally evading taxes is completely outside of the discussion here so at this point there is no point in discussing it anymore. May as well say that no one is overtaxed because they can just NOT pay taxes.

[cheapshades]

............there is no point in discussing it anymore..........

 

promise?  

[FranksHotPeppersAndMarijuana]

Malamute it does equal up.  And even if hypothetically it didn't then the legislature needs to pass appropriate tax laws to fix problems.  A small business owner shouldn't have to pay personal property tax on an office chair that has been owned for 25 years and has a depreciation value of $0.  You know Michigan is the only state in this region that levies such a tax? On an old rickety chair!!!! Still own it, still got pay tax on it.  Sounds more like some medieval king's tax assessment than a modern era tax structure.  And heaven forbid you replace that old rickety chair because then you are going to be paying an even higher PPT on it. But it's okay because it's business and they are all fat cat thiefs right?

[+Malamute]

Well, that is not necessarily correct. Actually most states around us have TPP taxes.Illinois doesn't and Pennsylvania don't... but Indiana, Wisconsin etc do AFAIK.

[FranksHotPeppersAndMarijuana]

An article written by Jonathon Oosting is where I got the info about other states and a PPT. I cannot vouch for that first hand because I didn't research it.

[Restorium2]

You know Michigan is the only state in this region that levies such a tax?

Other States

Thirty-five states levy a PPT, and in most the levy is similar to Michigan’s. Ten, including Illinois, New York, and Pennsylvania, have no PPT. The remaining five levy a PPT but allow specific exemptions (e.g., for manufacturing equipment).

[Restorium2]

And even if hypothetically it didn't then the legislature needs to pass appropriate tax laws to fix problems.

Now you finally are where the rest of us are. Frank made it to the punch line. We are going to get slammed with a new tax to make up for those lost billions. The one trick pony. Cut taxes until we are totally in the ditch then levy new ones that are 'More Even Handed'. Why not do this when the roads are great, the schools are great, and we have dems in control so we don't get flogged? Instead it happens when the roads are bad, schools are closing for lack of the state funding them, and self-serving republicans rule the legislature.

[beourbud]

Now you finally are where the rest of us are. Frank made it to the punch line. We are going to get slammed with a new tax to make up for those lost billions. The one trick pony. Cut taxes until we are totally in the ditch then levy new ones that are 'More Even Handed'. Why not do this when the roads are great, the schools are great, and we have dems in control so we don't get flogged? Instead it happens when the roads are bad, schools are closing for lack of the state funding them, and self-serving republicans rule the legislature.

Right On

[Restorium2]

Malamute it does equal up.  And even if hypothetically it didn't then the legislature needs to pass appropriate tax laws to fix problems.  A small business owner shouldn't have to pay personal property tax on an office chair that has been owned for 25 years and has a depreciation value of $0.  You know Michigan is the only state in this region that levies such a tax? On an old rickety chair!!!! Still own it, still got pay tax on it.  Sounds more like some medieval king's tax assessment than a modern era tax structure.  And heaven forbid you replace that old rickety chair because then you are going to be paying an even higher PPT on it. But it's okay because it's business and they are all fat cat thiefs right?

Chairs and computers get depreciated to zero after 5 years in most cases. You are really reaching into the 'unreal' now Frank, as you try to justify wrongness.

 

The simple answer was right there in front of your nose, instead the Republicans decided to make a mountain out of a mole hill and repeal the whole tax;

 

Revised Depreciation Schedules

Finally, many analysts and policymakers argue that the tax’s administration should be improved. The state publishes the depreciation schedules that local assessors use to calculate tax liability. Based on the property’s age and useful life, these schedules determine depreciation factors that then are multiplied by the property’s original cost; this calculation establishes the item’s taxable value. The depreciation schedules have not undergone major revision since 1964—more than 30 years. Furthermore, many observers argue that the state’s use of only a few schedules results in the actual value of personal property being misrepresented for many business. The state has hired outside consultants to review the current depreciation schedules; recommendations for change may be presented in early 1999. While schedule revisions probably will lead to an overall reduction in tax collections, some individual companies could see a tax increase.

[Norby]

Other States

Thirty-five states levy a PPT, and in most the levy is similar to Michigan’s. Ten, including Illinois, New York, and Pennsylvania, have no PPT. The remaining five levy a PPT but allow specific exemptions (e.g., for manufacturing equipment).

I'm sure New York makes up for it in many other ways!