PRIORITY ISSUE | TANGIBLE PERSONAL PROPERTY TAXES

There is widespread acceptance among tax experts that personal property taxes are poor revenue-raising tools because of their economically damaging nature and their high compliance and administrative costs. In fact, the National Conference of State Legislatures (NCSL) enacted a statement of principles for lawmakers to use when thinking about these types of taxes. In it, NCSL notes:

Taxes on business personal property do not align with common principles of taxation (such as neutrality, efficiency, transparency, benefit, or ability-to-pay); distort markets by discouraging capital investment, expansion, and replacement; and impose high administrative and compliance costs. Since property taxes are primarily a local revenue source, the current business personal property tax system is characterized by inconsistency within states regarding property classification, assessment methods and ratios, and other rules, creating complexity and confusion for taxpayers.

Recognizing the economically detrimental nature of personal property taxes, most states have enacted provisions limiting their scope or simplifying administration, and several have eliminated them altogether.


Because of this, many states do without the tax entirely, while the majority of others have some sort of reforms in place to help alleviate some of the high compliance burden of the tax. Only a few states tax business personal property and/or inventory while not providing any other form of relief to taxpayers subject to the tax. In addition to the National Conference of State Legislatures (NCSL) work on the topic, the American Legislative Exchange Council (ALEC) also passed a resolution in favor of personal property tax repeal.

The map below shows how different states tax inventory under their business personal property tax, if they levy one at all. Many states (those denoted in orange, blue, and gold) offer some kind of tax relief to help mitigate some of the burdensome effects of this type of tax—such as treating some or all of the rental fleet as a special class of property and exempting it from the tax; levying and industry-supported alternative tax; or offering credits, exemptions, reimbursements, or some other type of in-lieu-of payment.

Click map to enlarge.