Michigan cities ask legislators to ensure non-residents pay taxes

The Michigan Capitol Building in Lansing

LANSING, Mich. – Michigan mayors on Monday asked the Legislature to act quickly to ensure two-dozen cities collecting income taxes do not lose revenue because non-residents are working at home during the coronavirus pandemic.

Officials warned that without the approval of bills in December's lame-duck session, the communities could lose up to $160 million in 2020. The proposed “community stabilization plan” would prevent workers, who typically have city income taxes withheld from their paychecks, from seeking refunds.

The Michigan Municipal League also requested that the Republican-led Senate and House let public bodies meet virtually beyond Dec. 31 and tackle “unintended interactions" between a tax-limiting state constitutional amendment — known as Headlee — and Proposal A, a 1994 overhaul of the tax and school-finance systems. Mayors warned that COVID-19 is permanently closing businesses and reducing occupancy for retail and office space, which could reduce property values and result in cuts to tax revenue.

Twenty-four cities, including Michigan's three of it biggest — Detroit, Grand Rapids and Lansing — levy an income tax.

Grand Rapids Mayor Rosaylnn Bliss likened the income tax proposal to a manufacturer-backed bill that would continue to tax business equipment where it is normally based and not elsewhere due to the pandemic.

“It is also similar to measures that have been taken by lawmakers in Ohio recently. They passed this to protect their communities and the services that those communities provide,” she said.

Local governments have long complained that municipalities cannot benefit from market growth in existing property values. They want to let millage rates be adjusted up and down depending on how values track with inflation and to change a “rollback” formula — though the odds of legislators finding consensus on an issue as significant as property taxes in a matter of weeks are low.

Ahead of the postelection session, which resumes Tuesday and is expected to last three weeks, Democratic Gov. Gretchen Whitmer has asked legislators to approve up to $100 million in financial relief for people and businesses hurt by the pandemic and to make permanent the state's 26 weeks of unemployment benefits and to increase the maximum weekly amount from $362. She has not specified how such aid would be distributed.

The state budget office said revenue collections in the 2-month-old fiscal year were coming in above estimates.

Amber McCann, spokeswoman for Senate Majority Leader Mike Shirkey, said he was “glad to see the governor reverse her position that there is nothing she can do for the workers and businesses impacted by her shutdown orders. We are not able to endorse the governor’s plan without having access to the details, specifically a funding source.”

She was referring to statements Whitmer made on Nov. 15, when she announced her administration's latest restrictions following a surge in cases, hospitalizations and deaths. Asked then what she would do to help people who lose their jobs, the governor again called on President Donald Trump and Congress to enact an additional federal rescue package. GOP lawmakers also have said more federal aid is needed.

McCann said Senate Republicans will soon share their own "responsible plan to get dollars to Michiganders in need.”

Also Monday, the state's economic development board authorized giving $10 million in federal virus aid to small businesses that have had to close or limit service under the most recent rules, including restaurants, conference centers and bowling alleys.

“There's never enough resources to be able to help our friends in small business,” said Mark Burton, CEO of the Michigan Economic Development Corp. He estimated that fewer than 700 businesses would receive assistance if all the grants were for the maximum of $15,000.


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