Ann Arbor / Ypsilanti Regional Chamber

Proposed City Income Tax

If you’ve been following the news, there’s talk of a proposed City income tax – the City just recently released an income tax feasibility study conducted by Plante & Moran. If this measure appears on the November ballot, it’ll be at City Council’s direction. City Council is tentatively scheduled to take up consideration of this matter on August 17. However, the final up or down vote, assuming one is needed, will rest with voters in November and not with City Council.

 

It’s estimated that approximately 75,000 individuals commute to Ann Arbor on a daily basis for work. These nonresidents don’t directly pay taxes to the City, though they benefit from City services. This City income tax measure may therefore be seen as an effort to shift some tax burden away from City property owners to commuters by taxing their income generated within City confines.

 

And to some, it simply is an equity issue – City property owners currently subsidize services provided to commuters. So the argument goes, commuters shouldn’t be allowed to continue to freeload, but instead should be required to pay their fair share for City services.

 

To others, the issue has more to do with the City’s present financial state. City reliance on property tax revenues has proven tenuous due to declining property values, as well as the degree to which land within City boundaries is becoming tax exempt. In April of this year that tax exempt figure was placed at approximately 40 percent.

 

The University of Michigan’s recent acquisition of the former Pfizer site is perhaps the perfect illustration. U-M is a tax exempt entity. Its purchase of the Pfizer campus means that 174 acres of City land will be coming off of the tax rolls.

 

To redress this, the City income tax will potentially yield an additional $7.6 million in City revenues (relative to City property tax revenues).

 

City property owner tax relief will come in the form of elimination of the City general operating millage, currently levied at 6.2 mills. In other words, post-November City property owners would see about a 15 percent property tax reduction. Also noteworthy, this measure will impact all City residents, property owners or not, irrespective of where their incomes are earned.

 

If placed on the November ballot, the Chamber’s Public Policy Committee will analyze this measure and offer an opinion. While I can’t yet speak for the Committee with regard to this matter, I can tell you that historically the Chamber has had concerns regarding tax measures of this sort.
 

Kyle Mazurek, v.p. of government affairs