Ann Arbor Area Community News
Consulting firm Plante Moran yesterday delivered their report on a possible city income tax to the City of Ann Arbor. The City Council will consider placing a measure on the ballot in November to create an income tax for those who live or work in Ann Arbor. From the Ann Arbor News:
The independent study stated an income tax of 1 percent on residents and businesses and 0.5 percent on non-residents could raise between $905,000 to $18.6 million annually, depending on the size of the exemption set by the City Council for dependents in a household.
Property owners – whether homeowners or landlords – would be the clear winners under this plan, while renters, students, and especially commuters would be the losers.
City Councilmember Mike Reid (R-2nd) points out that businesses and residents who rent, rather than own, their space could be net losers—renters would pay the new income tax, while landlords would receive the property tax break. The News notes that the City is “hopeful” landlords would lower rents in response to the lower property tax. It can be presumed city officials are also peering out their windows hopefully for a glimpse of the flying pigs.
The explicit target of the move is to capture some tax dollars from the University of Michigan,
“Look at the U of M,” said Council Member Margie Teall, D-4th Ward. “We don’t collect anything from them.”
If University employees are forced to pay income taxes, many may demand higer salaries from the University in order to make up for the lost income—if the University complied, it would have to raise tuitions or cut services in other areas, as extra money from the State is not likely forthcoming.
Commuters who live outside of Ann Arbor would receive no benefit from the tax shift, as most of the revenue would be used to pay for existing services, and not for new services that would provide them any new value, like commuter transit. Additionally, the effects of this tax on commuters could be felt in other cities, perhaps diverting money from the City of Detroit’s budget to Ann Arbor,
Dave Asker of Plante Moran said a person can’t be fully taxed twice. For example, the study reports that 1,306 Ann Arbor residents commute to Detroit to work, which has a city income tax. Those people, he said, would continue paying Detroit’s income tax but would receive a credit for their Ann Arbor tax.
Clearly, the idea of a city income tax is skewed in the favor of local landowners, and would be at best neutral for everyone else who lives or works in Ann Arbor. Admittedly, the City needs to find new and better ways to raise money to meet the demands of the City budget (such as replacing the hemorrhaging municipal water system), but an income tax is not by any means “better”. Perhaps they should instead consider encouraging development (or redevelopment) of underused land and structures in the City: infill development and renovation of unused structures can increase tax revenues with minimal new demands on infrastructure, with the money coming from the owners of the newly valuable structure, and not from students, commuters, and renters in decrepit older housing stock.
As a final nail, notice that residents would be charged at a higher rate than non-residents, in effect bribing students to maintain addresses outside of Ann Arbor rather than, say, registering to vote within the city.
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