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September 13, 2019

Sharing Michigan’s tax burden could get easier, with bills introduced this week

  • Our recent report calls for expanding the menu of local-option taxes to address local road funding needs and reduce reliance on over-burdened property tax
  • Bills introduced in the House of Representatives this week would allow county-level motor fuel and vehicle registration taxes, subject to voter approval
  • State policymakers are taking note of limited funding options local governments have to address road funding, and other, service needs

Last week the Research Council published a road funding report recommending Michigan authorize local-option taxes to provide much-needed resources to improve and maintain county and municipal roads. Bills were introduced this week to do just that.

Our paper, Seeking Property Tax Relief: Exploring Alternative Local Road Funding Options, documents the extent to which local governments are already taxing properties for road funding.

Because the property tax is the only funding source available to most counties, cities, villages, and townships, raising money for local roads places an increased burden on an already overused tax. Millages financing city and county governments, schools, community colleges, trash collection, parks and other public services stack up fast. Cumulatively, Michigan property tax rates are among the highest in the nation.

Our paper documents the extent to which other states authorize their local governments to levy motor fuel, vehicle registration, income, and sales taxes to fund their local roads, leaving less of a tax load on property owners. It explores the benefits and weaknesses of each type of tax and discusses how each could be administered in ways that piggybacks on existing state tax administration. We recommend that Michigan authorize new taxes to be levied at the county or regional level, rather than at the municipal level, to keep tax compliance and administrative costs lows, as well as to mitigate economic distortions for businesses and consumers.

On September 12, bills were introduced as part of a bigger package to authorize local-option motor fuel and vehicle registration taxes at a county level. House Bill 4963 authorizes counties to levy local-option motor fuel taxes and for the distribution of revenues among the road agencies within each county.

House Bill 4964 authorizes local-option vehicle registration fees and for the distribution of the revenues.

Introduction of the bills is one step in the legislative process. The bills must receive committee hearings, be voted on in each chamber, and then receive the approval of the governor.

Further, the Michigan Constitution and state law would require that the counties pass a resolution or ordinance to levy the tax and specify the tax rate. The proposed tax would then be submitted for voter approval before it could be applied.

Having a greater variety of revenue-raising tools will help local officials craft taxation to serve the needs of each community, something they, after all, know best.

President

About The Author

Eric Lupher

President

Eric has been President of the Citizens Research Council since September of 2014. He has been with the Citizens Research Council since 1987, the first two years as a Lent Upson-Loren Miller Fellow, and since then as a Research Associate and, later, as Director of Local Affairs. Eric has researched such issues as state taxes, state revenue sharing, highway funding, unemployment insurance, economic development incentives, and stadium funding. His recent work focused on local government matters, including intergovernmental cooperation, governance issues, and municipal finance. Eric is a past president of the Governmental Research Association and also served as vice-chairman of the Governmental Accounting Standards Advisory Council (GASAC), an advisory body for the Governmental Accounting Standards Board (GASB), representing the user community on behalf of the Governmental Research Association.

Sharing Michigan’s tax burden could get easier, with bills introduced this week

  • Our recent report calls for expanding the menu of local-option taxes to address local road funding needs and reduce reliance on over-burdened property tax
  • Bills introduced in the House of Representatives this week would allow county-level motor fuel and vehicle registration taxes, subject to voter approval
  • State policymakers are taking note of limited funding options local governments have to address road funding, and other, service needs

Last week the Research Council published a road funding report recommending Michigan authorize local-option taxes to provide much-needed resources to improve and maintain county and municipal roads. Bills were introduced this week to do just that.

Our paper, Seeking Property Tax Relief: Exploring Alternative Local Road Funding Options, documents the extent to which local governments are already taxing properties for road funding.

Because the property tax is the only funding source available to most counties, cities, villages, and townships, raising money for local roads places an increased burden on an already overused tax. Millages financing city and county governments, schools, community colleges, trash collection, parks and other public services stack up fast. Cumulatively, Michigan property tax rates are among the highest in the nation.

Our paper documents the extent to which other states authorize their local governments to levy motor fuel, vehicle registration, income, and sales taxes to fund their local roads, leaving less of a tax load on property owners. It explores the benefits and weaknesses of each type of tax and discusses how each could be administered in ways that piggybacks on existing state tax administration. We recommend that Michigan authorize new taxes to be levied at the county or regional level, rather than at the municipal level, to keep tax compliance and administrative costs lows, as well as to mitigate economic distortions for businesses and consumers.

On September 12, bills were introduced as part of a bigger package to authorize local-option motor fuel and vehicle registration taxes at a county level. House Bill 4963 authorizes counties to levy local-option motor fuel taxes and for the distribution of revenues among the road agencies within each county.

House Bill 4964 authorizes local-option vehicle registration fees and for the distribution of the revenues.

Introduction of the bills is one step in the legislative process. The bills must receive committee hearings, be voted on in each chamber, and then receive the approval of the governor.

Further, the Michigan Constitution and state law would require that the counties pass a resolution or ordinance to levy the tax and specify the tax rate. The proposed tax would then be submitted for voter approval before it could be applied.

Having a greater variety of revenue-raising tools will help local officials craft taxation to serve the needs of each community, something they, after all, know best.

President

About The Author

Eric Lupher

President

Eric has been President of the Citizens Research Council since September of 2014. He has been with the Citizens Research Council since 1987, the first two years as a Lent Upson-Loren Miller Fellow, and since then as a Research Associate and, later, as Director of Local Affairs. Eric has researched such issues as state taxes, state revenue sharing, highway funding, unemployment insurance, economic development incentives, and stadium funding. His recent work focused on local government matters, including intergovernmental cooperation, governance issues, and municipal finance. Eric is a past president of the Governmental Research Association and also served as vice-chairman of the Governmental Accounting Standards Advisory Council (GASAC), an advisory body for the Governmental Accounting Standards Board (GASB), representing the user community on behalf of the Governmental Research Association.

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