Michigan Cities Want A State Bailout Over Lost Income Taxes

Battle Creek is one of 24 Michigan cities that requires people to pay a city income tax regardless of where they live, as long as the employer is within the city limits. All two dozen cities are facing financial hardships from tax declines blamed on the COVID-19 virus outbreak. Battle Creek has already announced layoffs and budget cuts. But like all the other cities around the state, the municipal budget is full of holes and there aren’t many ways to plug the financial losses.

Leaders of many of the local income tax issuing cities are making direct pleas to state lawmakers for help. Last week, Democratic Governor Gretchen Whitmer announced she is requesting the legislature put together a $100 million dollar relief package to help the state weather the financial crunch of the virus outbreak. That followed a letter to President Trump asking for an immediate federal bailout.

The city leaders are spelling out many specifics of what they think the state legislature should do to help them make it through the financial mess. They don’t want to wait for the potential of another big federal relief bill. The main reason is political leaders in Washington can’t seem to agree on much of anything these days, especially another bailout package.

The Detroit Free Press reports the city leaders from across Michigan are asking for a laundry list of income-generating changes. They include:

-Allowing the 24 Michigan cities with income tax to continue to collect those taxes from people who are working from home because of the coronavirus, as if those residents were working at their usual places of business.

-Allow millage rates to move up or down based on the relationship between growth in property values and changes in the inflation rate. There would still be limits on increases to millage rates and for properties that do not change hands, maximum tax rates could still not increase beyond the rate of inflation.

-Allow cities and other local taxing authorities to more fully benefit from the tax benefits resulting from increasing property values after a sale, while still complying with the Headlee Amendment to the state constitution, which limits property tax revenues resulting from increased assessments.

-Allow local governments to continue to hold public meetings remotely beyond the end of this year when current approvals under state law expire.

Some estimates are as high as $160 million that cities with income taxes may lose this year from people working at home.  Budget analysts figure the state is facing a budget shortfall of up to $1 billion for the 2022 fiscal year. That leads to questions about how the legislature can help the cities when it hasn't figured out how to cover the state's overall shortfall.