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1 Garett Watson, States Should Continue to Reform Taxes on Tangible Personal Property 1 (2019)

handle is hein.taxfoundation/ssreftx0001 and id is 1 raw text is: 

States Should Continue to Reform

Taxes on Tangible Personal Property

Garrett Watson'
Special Projects Manager

Key Findings

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      IMany state and local governments impose ad valorem property taxes on
      tangible personal property (TPP) in addition to property taxes applied to land
      and structures. Tangible personal property taxes are levied on property that
      can be moved or touched, such as business equipment, machinery, inventory,
      and furniture.

      Forty-three states include TPP in their property tax base. Of states reporting
      personal property tax data, state reliance on personal property in 2017
      ranged from 1.79 percent to about 29 percent of state property tax bases.
      For states reporting, personal property as a proportion of the average state
      tax base has declined from 11.27 percent to 9.98 percent from 2006 to 2017.

      Taxes on tangible personal property are a source of tax complexity and
      nonneutrality, incentivizing firms to change their investment decisions and
      relocate to avoid the tax. Different types of TPP often receive preferential
      treatment depending on how the property is used or where it is invested,
      further distorting economic decision-making.

      State and local governments have many options to alleviate the burden of
      TPP taxes. In addition to repealing them, options include enacting de minimis
      exemptions for firms with small amounts of property, expanding existing
      de minimis and universal exemptions already existing in statute, permitting
      localities to lower TPP taxes through lower millage rates or assessment ratios,
      and streamlining rules related to depreciation of TPP and the declaration of
      taxable TPP to tax authorities.

      The experience of state and local governments expanding TPP tax
      exemptions and offering local-option tax reductions over the past decade
      can provide a road map for policymakers reforming TPP taxes in their
      jurisdictions. States should permit local-for-local tax swaps to reduce TPP tax
      burdens while transitioning localities from TPP taxes as a revenue source.

1  The author thanks Brittany Moore for contributing to statutory research for this piece.


No. 668
Aug. 2019

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