House advances property tax cuts – Service tax debate looms

What’s happening:The Michigan House late Thursday approved a major property tax relief package tied to Speaker Hall’s proposed tax overhaul.

• Passed 57–44 ahead of next week’s legislative break
• The broader plan still depends on a separate proposed tax on services bill that has not yet advanced

How it would work: The speaker’s proposal aims to deliver roughly $5 billion in property tax relief by:

• Eliminating the state’s six-mill property tax
• Repealing the personal property tax and real estate transfer tax
• Eliminating the “pop-up tax” when property changes ownership
• Requiring at least $1 billion in utility rate rollbacks

The Speaker has said the overall plan would be “revenue neutral” and protect school and local government funding.

The key issue: How to replace the revenue: The package is tie-barred to HB 5880 – a proposed 6% tax on services intended to replace lost revenue through a new reimbursement fund. That bill has not moved yet.

Speaker Hall has suggested the tax would target select “luxury” or non-essential services, including areas like:

• Tourism and recreation services (golf, skiing, marinas, etc.)
• Certain consulting and AI-related services
• Newspaper publishing and performing arts
• Political advertising

However, major questions remain unanswered:

• Which services would ultimately need to be taxed to make the property tax proposal revenue neutral
• Whether business-to-business (B2B) services would be exempt
• How broad the proposal could become during budget negotiations

Speaker Hall has estimated a service tax could generate as much as $18 billion – though that figure includes B2B services, which had previously been reported as supposedly not being included.

What we’re saying: The Michigan Chamber supports efforts to modernize and improve the property tax system. However, broad new taxes on services raise significant concerns for employers and Michigan’s economic competitiveness.

• Any proposal must exempt business-to-business services to avoid “tax pyramiding,” where taxes compound throughout the supply chain and increase costs for businesses and consumers alike
• A stronger long-term approach is fiscal discipline and spending prioritization – not expanding the tax base

What’s next: The issue now shifts into broader budget negotiations between the House, Senate and Governor. Expect continued debate overs specific service taxes and potential exemptions.

⚠️To weigh in or share your perspective,contact Randy Gross.