Why Gov. Needs to Sign Chamber-Backed PPE Tax ReliefJune 17, 2021
House Bill 4224 and 4225 would allow a business to claim personal protective equipment (PPE) tax exemptions in response to the COVID-19. The bills would only exempt PPE and other tangible personal property from the taxes if they were specifically used in relation to COVID-19. If the governor signs them into law, businesses with written COVID-19 safety plans required by the Michigan Occupational Safety and Health Administration would not have to pay the state’s 6% sales and use tax on purchases of PPE and disinfecting supplies.
“Throughout this pandemic, small businesses around our state have paid taxes on the equipment needed to remain operational at great cost to their bottom line,” said Matt Patton, director of government relations for the Chamber. “Despite a bitterly disagreeable political climate, these bills brought Democrats and Republicans together in order to make life-saving PPE more affordable by stopping the government from profiting off of the necessity of it.”
Businesses Need Relief Now
- PPE is a lifeline for businesses: COVID-19 is an immense, unplanned expense for businesses. Government grants and PPE distributed so far have undoubtedly helped job providers, but they fall short of achieving the certainty our economy requires. Further, the total costs of taxable purchases of masks, physical barriers, and cleaning products far exceed government assistance. Michigan exempts these same products for the purpose of industrial processing – they should be exempt for the purpose of mitigating a pandemic too.
- Government should not profit from a pandemic: According to estimates from the non-partisan fiscal agencies, these bills purportedly will create an $18 million “reduction in sales and use tax revenue.” We suggest these estimates illustrate a small percentage (6%) of what businesses spent to stay open, save lives and remain in compliance with a tax code that competes against the pandemic, not a reduction in revenue.
- Exempting PPE is fiscally responsible: Actual revenue and estimates continue to exceed expectations. In fact, 2021 sales and use tax revenue so far exceed pre-pandemic 2019 figures by 11.4% and 57.8%, respectively. This is positive for Michigan as it rebounds. It is also important because these revenue increases provide justification to using American Rescue Plan funds for these bills – if need be – because state revenue exceeded years immediately prior and only purchases of PPE for the purpose of mitigating COVID-19 would be exempt.
Being a good steward of our state’s fiscal resources requires the ability to say no sometimes when asked for money. For much of the COVID-19 pandemic, the governor and the State Budget Office were extremely careful not to sign bills or implement changes that could negatively affect Michigan’s financial stability. That restraint and the large windfall of federal stimulus have solidified the budget over the short to medium term.
Responsible innovation in Michigan’s tax code is required at certain moments like this to ensure our state’s financial stability and livelihood. Now is the time investment and innovation that will lay the foundation for sustained economic growth. That means saying yes to businesses that have operated with public health and public safety in mind.