Over the past decade, there has been a flurry of local property tax rate increases, especially in those communities with historically high tax burdens. The Citizens Research Council has documented how Michigan’s local governments’ heavy reliance on property taxes has challenged their ability to sustain revenues given Michigan’s constitutional and statutory property tax limitations.
The City of Ecorse, located within Wayne County, has weathered many fiscal storms, including receivership, the loss of major employers, and a property tax base that has deteriorated steadily for the past 25 years. The community again faces a potential budget shortfall as the fiscal year ends. Given the few local options to raise revenues needed to fund operations, the city turned to raising the property tax rates. The total tax rate paid by Ecorse residents and businesses are the highest in Michigan.
Ecorse’s example is an extreme illustration of how the state’s ineffective property tax rate limitations have enabled the city’s total tax rates to become the highest in the state. With a declining tax base and constitutional revenue limitations, city policymakers and residents felt pushed to offset the tax base declines with higher tax rates. With few alternatives to diversify revenues, local governments may feel that they have little choice but to raise rates to sustain operations and meet service obligations.
IN A NUTSHELL
-- Michigan’s local governments’ heavy reliance on property taxes has challenged their ability to sustain revenues. With few alternatives to diversify revenues, local governments may feel that they have little choice but to raise rates to sustain operations and meet service obligations.
-- The experience of the City of Ecorse provides an example of how a community’s financial pressures lead to property tax rates that rise despite constitutional and statutory limitations.
-- A solution to Michigan’s ineffective property tax rate limits may be found through a comprehensive reform of the state’s municipal finance system and consideration of alternatives to the property tax.
