State Steals More Tax Revenue From Detroit

Detroit City Councilwoman JoAnn Watson speaks in front of City Hall announcing a lawsuit challenging the state's "emergency manager" law which passed the Michgian Legislature during the Winter of 2011. (Photo: Abayomi Azikiwe), a photo by Pan-African News Wire File Photos on Flickr.

Small cut to Detroit income tax will stand after negotiations collapse

8:32 PM, July 18, 2012
By Dawson Bell
Detroit Free Press Lansing Bureau

LANSING – Detroit residents and people who work in the city apparently are going to be able to hang on to the modest income tax cut that went into effect July 1 after the Legislature failed Wednesday to reach agreement on a proposal to rescind it.

The rate cut – from 2.5% to 2.4% for residents and 1.25% to 1.2% for non-residents – will cost the cash-strapped city government about $8.5 million a year.

Negotiations over a proposal to restore the rate, part of a deal that would authorize the creation of a new lighting authority for Detroit, collapsed late in the day, Senate Majority Leader Randy Richardville, R-Monroe said.

Richardville said members of his caucus were willing to freeze the rate in June before the cut went into effect, but were unable to win support for the lighting plan from Senate Democrats at that time. After July 1, the GOP members viewed the change as a tax hike and balked, he said.

Neither the income tax rate nor the lighting authority came up for a vote Wednesday. But Richardville said he expects the lighting proposal – which would create an authority to take over responsibility for Detroit streetlights and create a revenue stream to finance improvements – will be addressed soon.

Debate over the income tax rate is over, he said.

Detroit’s tax rate, the highest in the state, is required under a 2003 law to decline fractionally every year, unless the city meets several criteria for financial distress. Oddly, the city didn’t meet the criteria last year because overall income tax revenue actually increased between 2010 and 2011.

But Detroit officials, and the administration of Gov. Rick Snyder, said the financially-troubled city couldn’t afford the lost revenue.