On Tuesday, June 8th, the Michigan House of Representatives passed a consensual resolution, 102-7, on a package of Tax breaks for personal protective equipment (PPE). The Detroit Regional Chamber helped introduce and advocated this bipartisan legislation. Governor Whitmer now has two weeks to sign or veto the bills. This legislation will help Michigan businesses save millions of dollars and offset unplanned operating costs during the pandemic. The chamber urges the governor to sign the law.
House Bill 4224 and 4225 would allow a company to avail of tax exemptions for personal protective equipment (PPE) in response to the COVID-19. The bills would only exempt PPE and other tangible personal items from taxes if used specifically related to COVID-19. If the governor legally signs it, companies with written COVID-19 safety plans required by the Michigan Occupational Safety and Health Administration would not have to pay the 6% state sales and use tax on purchases of PPE and disinfection supplies.
“During this pandemic, small businesses in our state paid taxes on the equipment needed to keep them operational at a high cost to their bottom line,” said Matt Patton, director of government relations for the chamber. “Despite a bitterly uncomfortable political climate, these bills have brought Democrats and Republicans together to make life-saving PPE more affordable by preventing the government from capitalizing on the necessity.”
Companies now need relief
- PPE is a lifeline for companies: COVID-19 is an immense, unplanned expense for companies. So far distributed government grants and PSAs have undoubtedly helped job providers, but they are not achieving the security our economy needs. In addition, the total cost of taxable purchases of masks, physical barriers, and detergents far exceeds government support. Michigan exhibits the same products for industrial processing purposes – they should also be exempted for the purpose of containing a pandemic.
- Government shouldn’t benefit from a pandemic: The bipartisan tax authorities estimate that these bills will supposedly “cut sales and use tax revenues” by $ 18 million. We suggest that these estimates illustrate a small percentage (6%) of what companies spent staying open, saving lives and complying with a tax law that competes against the pandemic, rather than reducing revenue.
- The exemption of PPE is taxable: Actual sales and estimates continue to exceed expectations. In fact, sales and use tax revenues in 2021 have so far exceeded the pre-pandemic figures by 11.4% and 57.8%, respectively. This is positive for Michigan as it recovers. It’s also important because these revenue increases justify using American Rescue Plan funds for these bills – if necessary – as government revenues exceeded the years immediately preceding and only exempted the purchase of PPE for the purpose of containing COVID-19.
To be a good steward of our state’s finances requires the ability to sometimes say no when asked for money. During much of the COVID-19 pandemic, the governor and state budget office have been extremely careful not to sign any bills or make changes that could adversely affect Michigan’s financial stability. That reluctance, and the great stroke of luck of the federal incentives, have solidified the budget in the short to medium term.
At certain moments like these, responsible innovation in Michigan tax law is required to ensure the financial stability and livelihood of our state. Investments and innovations that lay the foundation for sustainable economic growth are now the order of the day. That means saying yes to companies that are committed to public health and public safety.