Quote Originally Posted by Huggybear View Post
Interesting that there was an unsuccessful class action on this in 1963. Are you sure that the 1963 constitution actually forbade local income taxation? Or did it just require such taxes to be authorized by state law? I'm just a little puzzled about how if the constitution prohibited something, you could get around that by simply passing a law. It all is, however, an academic point because the authorizing statute is still in effect and apparently hasn't been successfully challenged in 46 years.

I would disagree about the likelihood of overturning the local taxation statute - outstate interests did it with Detroit's residency requirements for public employees. The fact that everyone in Michigan lives in a city is not as important as the voting block that the 22 taxing municipalities might make. In reality, nonresident taxes probably aren't a big-ticket issue, and it's not really in the interest of a city without one to force cities with taxes to become more competitive.

Really, though, isn't the whole discussion of local tax rates in this thread a little bit upside-down? The first issue is pragmatic. There are certainly Detroiters who feel that the income tax is an inhibitor to business. But you probably wouldn't want to give up revenues by cutting the rate or eliminating the tax unless you were absolutely sure that you could make it up. And fundamental to that is making sure there are no other inhibitors such as crime, an uneducated workforce, lack of transit, etc. The better thing to do is to build tax breaks into development incentives where necessary. Making some brutal, across-the-board cut to the tax rates threatens that you will have a city that is bankrupt in addition to having other inhibitors.

The second question is related to localization. Of what people pay in taxes, city taxes are much more likely to stay local. Why aren't people attacking the export of money to the state, which for decades dumped tons of Detroit money into an irresponsibly large infrastructure and financially supported balkanized local governments? If you want to put a point or two of income-tax sweeteners into Detroit, I'd say take it from Lansing's cut.
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.