State Bill Would Limit City Income Tax Options
Above: Rep. Pamela Hornberger
A new bill introduced into the Michigan House of Representatives seeks to limit Michigan voters’ ability to pass city-wide income taxes on nonresidents. If it becomes law, the legislation will have far reaching financial implications for Michigan cities, including East Lansing.
Mayor Mark Meadows has accused Michigan State University of being behind this proposed legislation. Top MSU administrators, including President Lou Anna Simon, have indicated they are against the income tax. But an MSU spokesperson tells ELi MSU has had nothing to do with this bill.
House Bill number 4952 seeks to amend Public Act 284, the Michigan City Income Tax Act. If adopted, the amendments would end city income taxes on non-residents starting January 1, 2019.
Currently there are 22 Michigan cities that charge an income tax to residents and to non-residents who earn income within those cities’ boundaries. Under current Michigan law, non-residents of a city with an income tax can be income-taxed at up to half the rate of a city’s residents.
In many cases, cities have what East Lansing voters are being asked to consider on the November ballot: a 1.0% income tax for residents and 0.5% income tax on non-resident income earned in the city. (East Lansing’s voters are also being asked to decide on a property tax reduction that would take effect if the income tax passed.)
The new state bill has been introduced by Representative Pamela Hornberger, a Republican serving her first term. Hornberger represents District 32, which includes Macomb and St. Clair Counties.
Representative Hornberger received her Bachelor’s degree from MSU before obtaining higher degrees focused on education. (Before running for the legislature, she taught art in the East China School District for 23 years.) There are currently no cities within Hornberger’s district with income taxes
Meadows has previously indicated he believes MSU is working to stop an East Lansing income tax through legislation at the state level. In a letter to Simon dated August 23, Meadows wrote, “It is troubling that MSU has had one of its lobbyists recruiting members of the legislature to sponsor legislation that would eliminate the ability of voters in Michigan communities to decide whether they should be subject to a local income tax.”
Simon responded the next day that “our Government Affairs office is in constant communication with many in state government. Its staff members continue to seek relief for both the City and University encompassing a number of options.”
On Friday, September 22, Meadows posted on his Facebook page, “there is a new wrinkle. MSU has successfully enticed a first term legislator from Richmond to introduce a bill that would strip local units of government from having a vote on a local income tax.”
Meadows went on, “The bill would even eliminate the existing local income taxes in Michigan, which may answer the question about why it would expand medical schools to places that have a local income tax and then complain about East Lansing voters getting to decide whether they want one.” (Meadows is referring to MSU’s medical school campuses in places like Grand Rapids, Flint, Lansing, and Detroit, which have income taxes on residents and non-resident earners.)
But yesterday ELi contacted Jason Cody from the University’s Media Relations department about the new bill, and Cody responded, “we do not have anything to do with this bill, and we haven’t had a chance to review it yet.”
ELi reached out to Hornberger’s office but has not yet had the call returned.
Hornberger has also sponsored legislation to prohibit Michigan cities from enacting policies that would create “Sanctuary Cities” and a bill which would eliminate the requirement for school districts to follow prevailing-wage ordinances.
House Bill 4952 has been referred to the Committee on Tax Policy. Once a bill has been referred to a committee, the committee can choose to act on it in several different ways which include recommending it, referring it to another committee, or amending it. The committee can also choose to do nothing, in which case the bill would not progress further.