Leader Publications

Currently, when someone buys a new or used automobile or watercraft in Michigan, the state’s 6 percent sales tax is applied to the full sale price, even if the sale included a trade-in.

Michigan is one of only six states — and the only Great Lakes state — that taxes the value of a vehicle being traded in during a purchase.

This puts our local, in-state businesses at a competitive disadvantage and costs Michigan consumers more in extra taxes.

I strongly supported reforms recently approved by the state Senate because they will help spur vehicle and boat sales by reducing the cost of purchasing a new or used vehicle or boat in Michigan.

It will help consumers save money and also help southwest Michigan auto and boat dealers compete with out-of-state sellers.

Under Senate Bills 126 and 127, the state sales tax would only be applied to the difference between the price of a new car or boat and the value of a trade-in.

The relief would phase in over six years, starting with a $2,500 exemption in 2012. The amount would increase by $2,500 each year until reaching $15,000 in 2017. After that, the trade-in value is uncapped.

For example, once fully implemented, if a 5-year-old car valued at $5,000 is traded in and the car’s owner applies the trade-in value toward the purchase of a $25,000 car, the sales tax would only be applied to the $20,000 difference.

Bob Myers of Pier 1000 Marina in Benton Harbor supports the measures, saying: “Michigan consumers are essentially being double-taxed when they purchase a new watercraft with a trade-in. This legislation would help the southwest Michigan boating industry compete with retailers from across the border, which is a major concern for a company like ours.”

As a border community, our region understands that leveling the playing field with competition in neighboring states will help boost sales and create jobs.

The current law is a clear illustration of how bad tax policy can negatively impact job providers and consumers.

Making this smart reform could help our local economy while also saving consumers millions of dollars.