The Ypsilanti Courier
A Heritage Newspaper
Weekly Publication
Here it comes
After years of debate, income tax moves forward
By Dan DuChene, Staff Writer
PUBLISHED: May 10, 2007
Ypsilanti City Manager Ed Koryzno will be presenting four income tax proposals to City Council on Tuesday.
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Three variable tax rates differ in each proposal. The income tax rate for residents and non-residents is changed in each proposal, along with the idea of a property tax rollback. State law prevents a city from taxing residents above 1 percents. The law also keeps non-resident income taxes at a rate half of what city residents pay.
All proposals, except for the fourth, call for a $1,000 exemption from the tax.
Tax Proposal One
The first proposal sets the income tax rates at their maximum levels. Ypsilanti residents would pay a 1 percent tax while non-residents would pay .5 percent. The city's property tax would be rolled back two mills under the plan.
In the proposal package, the city estimates the average household in Ypsilanti has three family members, earns $40,000 a year and owns a home with $50,000 of taxable property value. It estimates the average family pays $2,784 in property taxes a year
Under this proposal, the average household would pay an additional $228 per year in local taxes.
The family's annual property tax would be $108 lower under this plan, but with a new $396 a year income tax.
Koryzno said residents will qualify for a $60 to $48 federal income tax deduction annually if an income tax were passed.
Residents who don't own property and make an average salary would pay an additional $396 a year in taxes. Non-residents making $40,000 a year would have a $192 increase in their taxes.
Tax Proposal Two
The second plan sets the resident tax at .8 percent while non-residents would pay a .4 percent tax. There is no property tax rollback.
The average family would pay an additional $264 per year in taxes under this plan. Their property taxes would remain constant, but the income tax would add an additional $312 a year to their tax bill.
Property owners and renters would see the same increase in taxes, but a non-resident would pay $162 a year less than residents.
Tax Proposal Three
The third plan sets the tax rates at their maximum, 1 percent for residents and .5 percent for non-residents, and rolls property tax back four mils.
According to the data from Koryzno, this proposal has the smallest impact on the average city resident, with a $132 a year increase in tax payments.
While the income tax rates are maxed out, adding $396 a year in taxes, the property taxes are lowered by $204 a year.
Renters would see the full $396 increase, while non-residents would see $192 a year added to their tax.
Tax Proposal Four
The final plan calls for the maximum level of tax rates and has no property tax rollback. However, there is a $3,000 exemption under the fourth plan.
According to the city's data, this plan would have the largest effect on residents, adding $312 a year to their tax payments.
Homeowners and renters would both see the $312 per year increase in their taxes because property taxes are not changed. Non-residents would see $156 a year added to their yearly taxes.
The Income Tax Debate
In the proposal, a chart estimates the city will see a $2.9 to $2.2 million increase in revenue in 2008 if a ballot measure were approved.
However, even if there was an income tax, expenditures would still catch up to revenues in four or five years.
"That's what it will look like if we continue on the course we're on," Koryzno said. "We still have to make some reductions."
Local resident Steve Pierce said the budget equaling out shows another hole in the income tax idea.
"It's a short-term plan at best," Pierce said.
He said the city has had other proposed cuts that never happened in the past. He said Ypsilanti doesn't need an income tax because it saw its revenues increase this year.
These income tax proposals come after Koryzno announced at the City Council meeting last week that the proposed cuts in the city's solvency plan would be postponed because the budget saw more revenue over expenditures than anticipated next year.
The reason for the unexpected revenue was an $18.5 million increase in the city's tax base, new grant funding and reorganizing the Department of Public Works' budget.
This buffer of income over revenue allowed the city to postpone cutting the rest of its funding to the Ann Arbor Transportation Authority for bus service and funding for recreation facilities. This warded off $300,000 in proposed cuts for one year.
With the solvency plan put on hold for a year, it leaves $26,517 left in revenue after expenses.
Pierce said there are other holes in the income tax proposals, especially the millage rollbacks.
"Absentee landlords and people with big houses and big incomes will benefit from the millage rollback," Pierce said. "This proposal hits the working poor hardest."
Because of Michigan's Homestead Property Tax Credit, Pierce said only those in the top tier in Ypsilanti will enjoy benefits from a millage rollback. He said for every dollar the property taxes are reduced, $1 in reimbursement is lost in the credit.
Only non-residents who own city property, people who earn too much money to qualify for the credit or those with a valuable house which is affected by the credit's $1,200 cap would see positive results from a millage rollback.
Ypsilanti Mayor Paul Schreiber said he favors a millage rollback.
"We really need to give residents some property tax relief," he said. "People who have invested in Ypsilanti deserve a break."
When asked about the effects a rollback would have in relation to the tax credit, Schreiber said he would have to investigate the matter.
One thing Schreiber said the income tax would accomplish is the ability to tax employees at Eastern Michigan University. He said though the university receives city services, there is no other way to tax the institution.
"It's a way to get money out of Eastern," Schreiber said. "Eastern Michigan University is a good partner, but we are up against the wall."
Pierce said he opposes the income tax because it shifts the tax burden from the businesses to the citizens. Another is the percent of household income that the tax would affect.
"As a percentage of household income," Pierce said, "People here will pay substantially more in taxes than someone living in Ann Arbor."
Schreiber said he looks forward to discussing the proposals at the council meeting on Tuesday and the budget meeting on May 24. He said he hopes to see a measure on the ballot in the November election this year.
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