State lawmaker may push for higher city income tax rates in Michigan

Jan 21, 2013

Some Michigan cities that collect an income tax might soon see a revenue boost.

A state lawmaker wants to increase the tax rate cities can charge.

State representative Andy Schor is looking at lifting the current state cap on city income tax rates.   Four cities (Detroit, Grand Rapids, Saginaw and Highland Park) are already allowed to collect more than the 1% limit on city residents and  .5% on non-city residents.

Flint is one of 17 other cities still stuck under the cap.   Flint Mayor Dayne Walling says boosting the income tax rate would help offset the city's declining property tax revenues.

"The income tax is...much better in alignment with our economic development efforts,” says Walling,  “It recognizes the role and burden for the city of being a regional employment hub."

And Flint could use the extra cash.

Flint finished its last fiscal year with its general fund $19.2 million in the red.  

Walling estimates that raising and equalizing Flint’s city income tax rate could generate an additional $10 million dollars a year. 

State Representative Andy Schor expects it will be a couple months before he’ll be ready to submit his bill to the legislature.      The bill may face an uphill battle in the state legislature.

In the meantime, he plans to talk with local city officials about increasing city income tax rates.

What cities impose an income tax?  

The following Michigan cities levy an income tax of 1% on residents and 0.5% on nonresidents.

Albion, Battle Creek, Big Rapids, Flint, Grayling, Hamtramck, Hudson, Ionia, Jackson, Lansing, Lapeer, Muskegon, Muskegon Heights, Pontiac, Port Huron, Portland, Springfield and Walker.

The exceptions to the above rates are as follows:

City                                                  Residents                     Nonresidents

Detroit                                              2.5%                             1.25%

Grand Rapids                                    1.3%                                   0.65%

Highland Park                                       2%                                       1%

Saginaw                                                  1.5%                                     0.75%