Clarification, it banned graduated income taxes.
Michigan Constitution Art 9 § 7 Income tax.
Sec. 7. No income tax graduated as to rate or base shall be imposed by the state or any of its subdivisions.
http://www.legislature.mi.gov/docume...nstitution.pdf
And you're right, with something written in plain as day language, I'm still at a loss to this day how they did an end-run around that language.
Residency is a different issue over taxation.
With employee residency, there is nothing charged back to the resident, if they choose to become a "former" resident and leave town.
With income taxes, if a resident leaves town, government will charge those remaining taxpayers at a higher tax rate to maintain revenue [[much like it is today).
There are more residents, than municipal employees. So when it affects their bottom line, it's not too difficult to see where they vote.
Your last paragraph brings up an interesting point. One of the things that came about during the Faustian Deal in support of the Michigan Income Tax back in '67, was the inclusion of state shared revenue to local municipalities.
Not only is Lansing has played fast and loose with doling out the money that promised back then, but also with what is required under Headlee to the tune of over $2.2 billion in 2009 alone.
http://council.legislature.mi.gov/fi...nal_report.pdf
Lansing isn't going to be giving anything up easily.
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