The Ypsilanti Courier
A Heritage Newspaper
Weekly Publication
Mayor's Corner
Income tax needed to maintain city services
Paul Schreiber
PUBLISHED: May 24, 2007
This month, City Council is considering an income tax proposal to be placed on the Nov. 2007 ballot.
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City Council can only put the income tax on the ballot; the voters must decide to enact it. Below I explain City Council's rationale for a tax shift from property tax to a combination of property and income tax.
Service and Staff Cuts
Since 1999, Ypsilanti city revenues have stagnated. Lucrative, heavy industries like Motor Wheel and Exemplar have left the city along with their personal property tax revenues. The largest employer in Ypsilanti, Eastern Michigan University, doesn't pay taxes. The city's second largest employer, ACH (formerly Visteon) is scheduled to close in 2008. Half of the property in Ypsilanti is off of the tax rolls.
In 2005, the city's Blue Ribbon Finance Committee strongly recommended that City Council consider putting an income tax question on the ballot. Today, the state of Michigan fiscal crisis makes state funding for Ypsilanti even more uncertain. The Michigan state legislature has yet to decide on the current fiscal year budget, the single business tax replacement and next year's budget.
The state's fiscal crisis is hitting municipalities all over Michigan. Ann Arbor is cutting staff for the next fiscal year, but Ypsilanti is at the head of the pack of Michigan cities in financial crisis. Since 1999, the police department has been cut from 54 officers to 40. The recreation department was eliminated in 2003. The Ann Arbor Transportation Authority has generously dipped into their reserves to fund half of the bus contract to keep all four bus-lines running in Ypsilanti. Cost savings from regional cooperation efforts between the city of Ypsilanti and neighboring townships will not balance the budget without further cuts in city services and staff. The state could easily cut more funds out of Ypsilanti's revenue stream. Future city revenues are projected to be stagnant.
Amid all of this uncertainty, Ypsilanti City Council is planning for the future by considering an income tax question for the November ballot. A vote on an income tax allows the voters to decide between more service cuts or an income tax that shifts the tax burden and increases revenue for city services.
Revenue Sources
The state allows cities four major revenue sources:
Property Tax: At 19 mills, the city of Ypsilanti general fund property tax rate is close to the state constitutional limit of 20 mills. Half of the land in Ypsilanti is off of the tax rolls. In accordance with state law, Eastern Michigan University does not pay property tax.
Revenue Sharing: Since 2002, the state has cut revenue sharing to the city from $4 million to $3 million.
Fees for Services: The state does not allow the city to make money on fees.
Income Tax: To bolster city revenues to prevent further cuts, Ypsilanti City Council is considering an income tax.
Property Tax vs. Income Tax
The state tax laws have made the property tax system highly inequitable. Due to the Headlee Amendment and Proposal A, an average Ypsilanti family who buys a home today pays 32 percent higher property taxes than their neighbors who live in a comparable home. Some families pay 50 percent more than their neighbors. Ypsilanti's high property tax rate amplifies the property tax disparity and discourages new investment.
Income Tax
An income tax is more fair than the property tax because it is based upon the ability to pay. Pensions, Social Security and annuities are not subject to income tax. An income tax would broaden the tax base to include non-residents who work in the city and enjoy city services (such as EMU). They would pay one half of the resident income tax rate.
City Council is now considering asking the voters to reduce the property tax rate and to add an income tax. The average Ypsilanti family would pay $16 more per month with a 4 mill property tax rollback and a 1 percent income tax.
An income tax would provide increased revenue that could:
Add police officers for enhanced patrolling, ordinance enforcement and festival supervision.
Pay the full AATA bus contract to ensure Ypsilanti bus service in the future.
Fund recreation utilities and a recreation coordinator for the Rutherford Pool, Senior Citizens' Center and Parkridge Community Center.
In summary, an income tax coupled with a property tax rollback would reduce the inequities of the property tax and provide a means of increasing revenues so that Ypsilanti residents can continue to enjoy the quality of life that they expect.
For more information, please visit the income tax proposals at the city of Ypsilanti website, www.cityofypsilanti.com. If you have questions, please contact your City Council members or me.
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