Memo 1147 | February 2018
This paper accompanies a longer paper, Diversifying Local-Source Revenue Options in Michigan, that analyzes the appropriateness and viability of authorizing a number of local-option taxes in Michigan. That paper is available at here.
In a Nutshell
- In Michigan, the current local government revenue structure is largely disconnected from the local economy. In Detroit the tax structure is more connected to the local economy than in other cities in the state, but many of Detroit’s revenue streams have suffered from the city’s decline. City revenue trends are not reflecting the resurgence in economic activity taking place within parts of the city and Detroit would benefit from more mechanisms to capture the renewed economic activity taking place within its boundaries.
- Many other states afford their cities and regions a number of tax options – sales, income, motor fuel, vehicle registration, alcohol, cigarette, utility users, hotel/motel, restaurant meals, vehicle rental, and entertainment/amusement – that create diverse revenue streams.
- Expanding access to local-option taxes in Detroit requires the state to authorize the city to levy more taxes, but it does not require the city the levy them. The expansion would simply provide Detroit with more options to fund city services. Ultimately, voters must decide the appropriate menu and level of services and the taxes to finance the services. Expansion of local-option taxes may be best suited to the regional level of government (e.g., Wayne County or Southeast Michigan region)