Local government and libraries will be hurt financially if a proposed cut in the state’s personal property tax is adopted by the state legislature, although lawmakers say they will try to replace most of the lost revenue from other sources.

State Representative Frank Foster, who met with citizens at the St. Ignace Public Library Thursday, January 12, said Governor Rick Snyder’s push to eliminate the tax is designed to stimulate small business growth, but acknowledged many rural communities will feel the brunt of the cuts, even with some replacements and exemptions to the cut.

“I’m not painting a rosy picture here,” Mr. Foster said. “I don’t believe it will be 100% [replacement funding], but it will be manageable.”

Michigan lawmakers have been considering the elimination of some or all personal property tax, a tax paid on equipment and other movable property. But the revenue communities receives from personal property tax is a major source of funding for libraries. Those counties where personal property tax makes up a greater percentage of total property tax would be hurt most if personal property tax revenue is cut. The counties that would be hardest hit are in the Upper Peninsula.

Personal property tax makes up between 8.1% and 12% of the total property tax revenue in Mackinac County, according to a study by Anderson Economic Group. Schoolcraft and Dickinson counties rely on personal property tax more than any other counties in the state, with the tax making up more than 16% of their total property tax revenue.

The St. Ignace Public Library would lose about 4% of its total revenue if personal property tax is eliminated, said Library Director Gina Kemp. The Dickinson County Library would lose 15% of revenue from its 2012 budget. Other Upper Peninsula county libraries, including Gogebic, Ontonagon, Iron, Dickinson, Delta, and Schoolcraft, would lose 15% to 19% of their total tax revenue, said Suzanne Dees of Superiorland Library Cooperative.

Reliance on libraries and library services increases in a difficult economy, she pointed out. People use libraries to look for jobs, file tax forms, and check out movies when they can’t afford a family night at a theater.

Libraries are important to communities, especially rural communities, Mr. Foster acknowledged.

As for replacement, Mr. Foster said the state has eliminated some loopholes and credits that some larger businesses had used to find tax breaks. Now that those businesses are paying taxes, he said it was his goal to reroute the money the state is no longer losing – about $2 billion for 2011 – to replace the funding lost with personal property tax cuts. In addition, he hopes to keep large commercial and utility businesses paying the tax, but cut it for small businesses. The tax tends to hurt small businesses more than larger businesses, and owners of large businesses don’t seem to mind paying the tax as long as their competitors do, he said.

In Moran Township, personal property tax contributes 24% of the $150,000 general fund budget, and utilities pay $26,000 of the $36,000 received in personal property tax, said Township Treasurer Sue Dionne.

The township has gas pipelines from both Great Lakes Gas and Enbridge

Energy, but they are classified as industrial, not utility, Mrs. Dionne said. Of the 22,398 parcels in the county, 59 are classified as utilities, she said.

Mr. Foster said the House of Representatives is now waiting to hear from the senate to move the legislation forward. The state senate and the governor’s office are in discussion over the legislation, finalizing details, said Greg Moore, legislative director for the office of Senator Mike Nofs (19th district). Mr. Moore said they want to make sure replacement money is there as they “don’t want to seriously impair local governments.” The senate may see the bill within the next couple of months, he said.