MI mayors want to collect income taxes from at-home workers

Local News

GRAND RAPIDS, Mich. (WOOD) — If your job is in the city of Grand Rapids but you’ve been working from your home in the suburbs during the pandemic, you may be looking at a break from paying city income taxes.

But mayors of cities, including Grand Rapids, that collect that tax, want legislators to make you pay anyway — even though you’re probably not benefiting from city services.

“I would say the company that calls Grand Rapids home, they still are using those services and they’re still going to need those service there when they start coming back,” Grand Rapids Mayor Rosalynn Bliss told News 8.

On Monday, she joined a coalition of other mayors asking legislators to adopt the Michigan Municipal League’s Community Stabilization Plan to help mitigate the pandemic’s one-two punch of increasing costs and decreasing tax revenue.

Fashioned after a recent Ohio measure, the plan calls for allowing Michigan’s 24 income tax communities to continue collecting taxes from people who normally work within their city limits but have recently been working remotely.

“That is the most important thing to our city,” Bliss said.

In addition to Grand Rapids, the 24 cities include Battle Creek, Ionia, Muskegon, Muskegon Heights, Portland and Walker. The municipal league says combined with tax collection losses from unemployment income, the two dozen governments would lose up to $250 million in revenue this year alone — nearly a third of their income tax revenue.

As recently as a month ago, Grand Rapids was projecting 3% to 5% shortfall in income tax revenues.

“We were clearly wrong,” Bliss said. “Going into next year, we’re now projecting anywhere from a 9% to a 12% shortfall.”

That works out to between $9 million and $10 million the city may not get.

While the city won’t outline potential cuts until the first of next year, services like the police and fire departments are among the likely targets.

Losses in property tax revenues from business closures and office space reductions is also a concern.

The mayors want legislators to remove a pop-up calculation tied to 1978’s Headlee Amendment that could impact future rollbacks. When a piece of property is sold, it’s reassessed for the current value. While that value may increase taxes on the property, it triggers a decrease in the rest of assessments citywide by a small fraction.

“Anywhere from $1, maybe $2 a year — but then you add that across an entire community with tens of thousands of properties, that actually adds up,” Bliss said.

The plan calls for lawmakers to restore Headlee to its original allowance for millage rate fluctuations so property values are based on actual inflationary activity, allowing cities, villages and townships whose tax revenue is impacted by shuttering businesses to collect property tax revenue based on actual real estate values.

Community leaders are also asking the Legislature to extend changes to the Open Meetings Act to allow public meetings to continue virtually past the current Dec. 31 end date. The municipal league argues the pandemic will still be an issue past the current Dec. 31 end date, which will force its members to choose between violating the Open Meetings Act requirements or disregarding the Michigan Department of Health and Human Services’ size limits for group gatherings, possibly leading to fines or lawsuits while putting board members and community members at risk.

Despite promises of a vaccine early next year and an eventual return to something that resembles normal, Bliss said a quick comeback for city revenues is unlikely.

“Economically, I think we’re going to be digging out of this hole for quite some time,” she said.

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