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.