Detroit Income Tax Revenue To Take Hit

The good news is that things are beginning to show signs of improvement in the City of Detroit. The bad news is that these improvements have caused the City to fail in meeting three of the four criteria necessary to prevent a roll-back of the income tax rate.

Michigan’s City Income Tax Law was amended in 1998 to begin rolling-back Detroit’s tax rates; however, it also included a provision that allowed the roll-backs to be paused if the City meets at least three of four criteria:

· Unemployment rate of 10-percent or higher

· Withdrawal from “rainy day” fund for previous two years or a zero balance in the fund

· Income tax revenue growth rate of .95% or less

· Local tax base growth rate of 80 percent or less of the statewide tax base growth rate

According to a report released by the Citizens Research Council of Michigan (CRC), the City of Detroit has met the first two; however, it will not meet either of the last two. This will cause the City to reduce the income tax rate beginning at the start of the new fiscal year, July 1^st, potentially costing Detroit $8.5 million in revenue. The rate reductions will be from 2.5 to 2.4 percent for residents and from 1.25 to 1.2 percent for non-residents, unless state law is amended.

posted by PAA Online , Friday, January 27, 2012 10:50 AM
LINK DIRECTLY TO THIS ARTICLE

This Week's Newsletter

Past Newsletters