Ann Arbor Considering City Income Tax, Blames State

But city is collecting and spending more, not less

Ann Arbor may be getting closer to imposing a city income tax on residents, an idea that has been kicked around for years by the college town’s local government officials.

City Council member Jack Eaton blames declines in state revenue sharing for putting Michigan municipalities, including Ann Arbor, in a fiscal bind, according to Michigan Radio. He says local officials were counting on that money.

The claim was echoed in a slideshow produced by city employees and presented at a recent city council meeting. The staffers claim that since 2003, the state has shorted Ann Arbor by $52 million compared to what they define as “full funding” under state revenue sharing.

ForTheRecord says: For years, municipal officials like Eaton have used reductions in state revenue sharing as a device to promote local tax increases and lobby for more money from the state.

But contrary to the bleak picture they have painted, state revenue sharing is just one of numerous income streams flowing into city coffers, many of which are increasing.

Ann Arbor is a good example. Even when adjusted for inflation, city spending has increased from $116.4 million in 2013 to $127.2 million in 2016.

Over the same period, state revenue sharing collected by the state and sent to Ann Arbor has been fairly flat. The city was collecting $11.9 million in state revenue sharing money in 2013, and $11.5 million in 2016 after adjusting for inflation.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.