"The right to criticize government is also an obligation to know what you are talking about."

-Lent Upson, first director of Citizens Research Council

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January 14, 2026

Evaluating a Local-Option Sales Tax Policy for Detroit

Citizens Research Council of Michigan today released an analysis of a local sales tax policy for the City of Detroit. We found that the relatively small potential revenue, in the context of Detroit’s $1.6 billion budget, is offset by the steep challenges that would stand in the way of enacting a one-percent tax. City policymakers will need to assess whether the potential new revenues are worth the state and local efforts required to secure authorization for such a tax.

Full Council Report

IN A NUTSHELL

-- Michigan’s local governments rely primarily on property taxes to fund general public services. The largest cities and counties continue to struggle to sustain and grow local revenues to meet their residents’ needs. The heavy reliance on only property taxes, which are subject to multiple limitations on growth, makes revenue generation difficult for areas with weak tax bases, such as in the city of Detroit.

-- While the path to adopting a local sales tax option for Michigan’s local governments is daunting, having access to taxes that diversify local revenues would help improve the fiscal health of the state’s most populated cities and counties, allowing them to benefit from the increased retail and commerce activity. Authorizing a local sales tax in Michigan will require amending the state Constitution, adopting state statutes authorizing local sales and use taxes, the local governing body to enact an ordinance, and voter approve of a new tax.

-- Estimating the revenue potential of a one percent local sales and use tax in Detroit is challenging. Data on sales tax collections is not available by geographic location, does not accurately jive with state sales and use tax laws, nor is household spending data and expenditures on taxable purchases available for city visitors. The Research Council estimates potential revenues for a one percent sales tax in Detroit to yield about $72 million annually.

Time to Reform the Process for Work Project Approval

In December, a little-known budget process suddenly took center stage in Lansing when the Republican-led House Appropriations Committee voted to block $645 million in “work project” spending. The move reversed funding that had been approved by both chambers just two months earlier as part of FY2026 budget bills, throwing dozens of organizations into uncertainty and triggering sharp criticism from Democrats.

Full Council Brief

On January 7, Attorney General Dana Nessel ruled the committee’s action unconstitutional. Her opinion concluded that allowing a single legislative committee to cancel work projects violates the Michigan Constitution’s separation-of-powers and bicameral requirements.

Because attorney general opinions are binding unless overturned by a court, the ruling immediately restored the blocked funding. Democrats welcomed the decision. House Republicans are legally challenging it.

IN A NUTSHELL

-- On December 10, the House Appropriations Committee set off a shockwave by disapproving $645 million in work project spending authority.

-- An Attorney General opinion issued on January 7 concluded the provisions in state law that gave the committee its authority to unilaterally disapprove the work projects was unconstitutional, restoring the funding but also effectively stripping the state legislature of any direct oversight over the designation of work projects.

-- Legislators on both sides of the aisle should be concerned about that loss of oversight, and the legislature should immediately begin considering law changes to address the situation as all sides await to hear from the courts on the issue.

ICYMI: Act 51 Study Committee -- A Missed Opportunity

Read the Brief

IN A NUTSHELL

-- The Act 51 Transportation Funding Study Committee convened in 1998 to identify inefficiencies in Michigan’s road program and advise the legislature on appropriate changes to the road funding distribution formula. -- The subsequent Study Committee report recommended the creation of an asset management process to inform and guide improvement of Michigan’s road program. State policymakers subsequently adopted an asset management program, but this has not resulted in meaningful reform. -- Core problems in Michigan’s roads program remain unresolved. The road funding formula is now more complex, more entrenched, and less effective than it was 25 years ago. Meaningful improvement will require independent research to achieve an objective assessment of problems and solutions.