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‘Taxation without representation’: Michigan bill would limit municipal income taxes

Residents who live outside cities wouldn’t be required to pay income taxes to cities
Income taxes
Income taxes(Source: WALB)
Updated: Jun. 11, 2021 at 1:32 PM EDT
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LANSING, Mich. (WJRT) - A bill introduced in the Michigan House this week would prohibit cities from collecting their income taxes from residents who live outside their boundaries.

Supporters say the bill would eliminate a form of taxation without representation, but opponents say it would cut off a vital source of revenue and residents near cities still benefit from their services. If enacted, the bill would affect Flint, Lapeer and Saginaw in Mid-Michigan, which all collect city income taxes.

Twenty-four Michigan cities collect their own income taxes for any job based within their borders. Most Michigan cities with income taxes charge nonresidents half of the rate charged to residents.

Supporters of this bill say they get taxed enough where they live and shouldn’t have to pay an additional tax just to go to work. They point out that noncity residents have no say in how much they are taxed or how that revenue is spent.

“You’re contributing to the community by working in the community but you’re not there all the time, a majority of the cities in Michigan don’t have an income tax and they make it work,” said Brown City resident Matt Muxlow.

Republican State Rep. Pamela Hornberger of Chesterfield Township in Macomb County introduce House Bill 4513. She said workers who live outside cities already contribute by being present in the city and spending money there.

“People being present in the city generates revenue. It was simply based on the fact that its taxation without representation,” Hornberger said.

The Michigan Municipal League is concerned about the financial losses cities would absorb without income tax revenue from residents outside their borders. Cities point out that the state has been cutting revenue sharing for years and this bill will leave them in even worse financial position.

“We estimated last fall as much as $250 million was going to be hit from those 24 cities’ budgets right now, so that’s a real concern for those communities,” said MML Director of State and Federal Affairs Chris Hackbarth.

The bill was referred to the Committee on Tax Policy for consideration. It would have to reach approval there, at the full House and in the Senate before Gov. Gretchen Whitmer could decide whether to sign it into law.

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