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Detroit is getting more serious about collecting city income tax, and it's paying off

Dec 19, 2016

Detroit officials say the city income tax is generating revenue and helping businesses.

Businesses in the city have a 2 percent income tax, while people who work there, even if they are not city residents or not, pay 2.4 percent.

As of last year, the state monitors Detroit's income tax returns.

John Naglick, the chief deputy chief financial officer and financial director for Detroit, said before the state began monitoring the tax returns, a lot of people didn't pay it.

“People that wanted to do the right thing would send in their tax return on time and with the money they owed and a lot of people weren't that honest,” Naglick said.

Naglick says now that the city and state are enforcing the tax return more strictly, the city will have more revenue for basic services like trash clean up and streetlights.

“As businesses do better, they pay this 2 percent tax to us, that lets us do a better job of city services, which hopefully increases their business,” he said. “So it becomes a virtuous circle, if you will.”

Naglick said that the city did however find a way to track down people who weren’t paying their income taxes.

“The state actually gets a complete database of Detroit residents that file a federal tax return, and they compared that to the number of residents that filed a city tax return,” and then they’d start chasing the people with a past due balance,” he said.

Naglick also said that because the city is taxing athletes and performers who come into the city, Detroit will actually benefit from the Pistons moving downtown.