Business Owners Call on Council to Pull Income Tax Proposal Off Ballot

Tuesday, September 12, 2017, 7:42 am
By: 
Jessy Gregg

Some East Lansing business owners are speaking out against the proposed East Lansing income tax that is set to be appear on the ballot for the November 7 election. Two MSU student leaders have joined with these business owners in calling on City Council to rescind the ballot proposal.

There is a small chance that the ordinance could be pulled from the ballot by City Council—for example, if an agreement between Mayor Mark Meadows and MSU President Lou Anna K Simon is reached—but the deadline for that possibility is quickly approaching. Council is set to meet at 7 p.m. tonight, and as of now, the issue of the income tax does not appear on that agenda.

If the income tax passes in November, businesses based in East Lansing will be subject to the same 1% tax on their profits that City residents would be required to pay on qualified incomes. (Non-residents working in East Lansing would be subject to a 0.5% tax on income earned in the City.) Businesses that do only part of their business in East Lansing would be responsible for determining what percentage of their profits were due to activities in East Lansing and would only owe tax on that amount.

The implementation of the income tax would come with a reduction in the property tax millage that would be applied equally to both residential and commercial properties in East Lansing. Businesses that own their places of business would benefit from that reduction, whereas businesses that rent space would not, unless their landlords reduce rents accordingly.

Yesterday a group of local business owners and MSU student leaders came together at Bell’s Pizza to hold a press conference objecting to the proposed income tax. The press conference was organized by Citizens for East Lansing’s Future, a newly-formed Local Ballot Question Committee which names John McNamara as its Treasurer and Thomas Morgan as its Record Keeper.

At yesterday’s event, Habib Jarwan, the owner of Bell’s Pizza, presented along with Nancy Marr of Prime Housing Group, President of MSU’s Council of Graduate Students Ashley Fuente, President of the Associates Students of MSU Lorenzo Santavicca, and community organizer Donald Power. All spoke in opposition to the proposed income tax.

Marr, the only speaker who was not an East Lansing resident, suggested that East Lansing was taking the easy route in seeking to close its revenue gap through a new tax. “It’s easier to raise taxes than it is to make cuts,” she said. “You have to spend less than you make whether you are a family, a business or a city.”

Fuente called the proposal “taxation without representation.” In response to the question of how East Lansing could raise income without the tax, she indicated that the City should take the $20 million that is being offered by MSU.

Joseph Maguire, President and CEO of Wolverine Development Corporation, sent a letter to the East Lansing City Council last month highlighting the difficulties faced by a business bordering two jurisdictions if one has an income tax and one does not. “We are quite literally on the front line of this issue,” his letter points out, referring to a vacant office suite which Wolverine Development Corporation owns and is looking to rent out on East Lake Lansing Road, directly on the East Lansing/Meridian Township boundary.

“Since the move to put the income tax on November’s ballot,” Maguire has told Council, “we have had 3 different prospects either drop our building from consideration or defer any decision until after the election.”

In the letter’s conclusion, Maguire suggests that, rather than basing income tax projections on a static model using the existing income base, the City would be better served by using a dynamic projection in which it is understood that businesses might “vote with their feet” and leave East Lansing’s municipal boundaries if an income tax is passed.

The Lansing Regional Chamber of Commerce has spoken out against the income tax as well, saying, “The City of East Lansing is home to growing families, young professionals and businesses—including employers both large and small. Adding burdensome financial obligations will hinder their potential for future growth and impact their ability to attract and retain top talent.”

According to the Chamber of Commerce, “If passed, the proposed income tax will impact the city’s ability to attract businesses, young families and retain college graduates and young professionals.”

Retaining talented employees was something that Joe Ford, owner of the search engine optimization company Netvantage, reiterated when he spoke with ELi. Ford said that most of his employees start as interns from MSU and then stay on as full employees after they leave school. He sees the income tax as burdensome to the young people who work for him.

Ford’s company works for some East Lansing based clients, like GreenStone Farm Credit Services and Michigan State University, but they also work for clients in cities as far away as Houston, Texas. “We have lots of great locations to choose from,” he told ELi.

Ford says that he and his employees enjoy the vibrancy of downtown East Lansing and that proximity to MSU was important as he was growing his business, but now that that relationship is established, those benefits would not outweigh the cost of the income tax if it were to pass.

“One percent [in income tax] is not a lot,” says Ford, “but in business everything counts, and, I hate to say it, but you need to be a little selfish sometimes.” He said that the attitude of City leaders seems to be that businesses will find ways to adapt if the ordinance passes. “That’s just not how business works,” he stated, saying that he found the indifference from East Lansing administrators to be troubling.

Accepting the “olive branch” that President Simon has offered in the form of five yearly payments totaling $20 million dollars would go a way towards rebuilding trust with East Lansing’s business community, according to Ford.

According to the income tax feasibility study prepared by Plante Moran as part of the Financial Health Team’s assessment of East Lansing’s fiscal options, the proposed income tax would generate $10.4 million dollars per year. The amount of the tax estimated to be generated by taxes on East Lansing businesses’ profits is $400,000 (of the $10.4 million). The study estimates that East Lansing residents would pay $5.6 million, with $4.7 coming from non-residents working in the city. Because of the property tax reduction that would go with the income tax, the net revenue to the city would be approximately $5 million per year.

East Lansing's City Council meets tonight at 7 pm in City Hall. Public comment is set to be received early in the meeting according to the published agenda.

 

Note: On September 13, this article was amended to correct a misattributed quotation and identification.