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Local Income Tax in Michigan – Helping or Hurting our Cities?

Income Tax in Michigan, Helping or Hurting?

128099662For the most part, Michigan cities do not have their own income tax. However, some cities impose a local income tax in addition to the 4.25% Michigan income tax. These local taxes apply to anyone who lives or works within the city limits. The standard local tax rate, applied in 18 of the 22 local income tax cities, is 1% for residents and 0.5% for nonresidents. The other four cities: Detroit, Grand Rapids, Highland Park, and Saginaw, all charge higher rates for residents and nonresidents.

Why Local State Tax is Hurting

The government thinks that this will bring in revenue, but instead, it’s creating a disincentive for people to work in these cities. Cities like Flint, Detroit and Pontiac are chasing work out of the city. Local Michigan income taxes are just creating another reason for people to pack up and move out of the city. Not surprisingly, the 3 cities that charge their residents the highest income tax rates all lost most of their population in recent decades. So many of these communities have low property tax revenues, ever decreasing population, and poorly performing schools. The City of Detroit has the highest tax rate in the state is on the verge of bankruptcy. This could be one of the reasons why. These cities are still lagging in revenue productivity, which the additional income tax is supposed to increase. Many of these cities in Michigan are suffering the greatest economic decline. The Michigan cities that charge local income tax tend to be the poorer cities in the area. The more affluent people tend to live in cities like: West Bloomfield, Troy, Bloomfield Hills, Birmingham and Novi, which do not charge any income taxes. The government needs to consider the fact that most of these income tax cities are swimming in debt. The local imposed tax is not going to change things. People need jobs to work and make money. That is what will change our economy. Not additional taxes that drive people away from this.

Another Tax, Another Burden

With this additional tax, Michigan taxpayers have to worry about another tax form for their returns. Each city the tax is imposed in has a specific form you have to file. This only adds on to the burden of filing taxes. These certain taxes can also create incentives for people to locate and find jobs in cities that do not levy a local income tax. If you live or work in cities where you have to file an additional tax form in that city, you will have to file 3 tax forms. One for the city, one for the federal state and one for the IRS.

The Michigan Cities That Charge Income Tax

The 18 cities that charge the standard rate are:

Albion, MIHudson, MIMuskegon Heights, MI
Battle Creek, MIIonia, MIPontiac, MI
Big Rapids, MIJackson, MIPort Huron, MI
Flint, MILansing, MIPortland, MI
Grayling, MILapeer, MISpringfield, MI
Hamtramck, MIMuskegon, MIWalker, MI

 

The exceptions to the standard rate are:

CityResidentsNonresidents
Detroit2.5%1.25%
Grand Rapids1.3%0.65%
Highland Park2%1%
Saginaw1.5%0.75%

  [author] [author_image timthumb=’off’]https://www.ayarlaw.com/wp-content/uploads/2013/02/venar-about-sm.jpg[/author_image] [author_info]Michigan tax lawyer, Venar R. Ayar, founder of Ayar Law Group, holds ten years of experience as an accounting specialist and tax lawyer. He earned his Juris Doctor at the University of San Diego School of Law, receiving a Master of Laws in Taxation—the highest degree available in tax. His main focus has become Michigan tax resolution as well as IRS tax resolution, including individual and business tax matters; tax planning, tax compliance and white-collar criminal defense. His business background has helped him to become personable and understanding in his work. Representing clients before the IRS, Ayar’s practice and experience has proved him as an honest and dedicated leader in the realm of Michigan tax lawyers. Click here to contact your Michigan tax lawyer, Venar Ayar. [/author_info] [/author]

Venar Ayar, Esq.

Venar Ayar, Esq.

Attorney-at-Law, Master of Laws in Taxation
Principal and founder, Ayar Law

Venar is an award-winning tax attorney ranked as a Top Lawyer in the field of Tax Law. Mr. Ayar has a Master of Laws in Taxation – the highest degree available in tax, held by only a small number of the country’s attorneys.