City Income Tax Proposal On November Ballot Sparks Business Revolt

A large number of East Lansing businesses have expressed opposition to an income tax proposal the city council has placed on the Nov. 7 ballot.

According to a poll commissioned by the Lansing Regional Chamber of Commerce, 80 to 85 percent of its members are opposed to the November ballot proposal. The measure, if approved by voters, would levy a 1 percent city income tax on residents and a 0.5 percent tax on people who work in the city but live elsewhere.

An East Lansing resident with an annual taxable income of $54,000 would pay $540 per year, on top of state and federal income taxes. The average taxable income in Ingham County is $54,689.

In a letter obtained by Michigan Capitol Confidential, Wolverine Development Corporation president and CEO Joseph Maguire said the prospect has already had an impact. Some potential customers have refrained from leasing office space in one of his properties in the city, he said. Maguire is the treasurer of the board of directors for the Mackinac Center for Public Policy, which publishes Michigan Capitol Confidential.

“In the case this income tax passes, it’s very clear we’re going to lose these tenant contracts,” Maguire said. “The revenue [from an income tax] in my view will be substantially less than they’ve projected.”

Maguire also said that while he believes people in the East Lansing city government are open to listening to residents’ concerns, he also believes the city council’s discussion of the income tax was not transparent enough. Its decision to discuss the income tax as a way to “enhance revenue” instead of balance the budget also caused him to believe that council members knew they wanted to implement an income tax before completing their public hearings on the matter.

Steven Japinga, director of government relations at the Lansing Regional Chamber of Commerce, said his organization is encouraging East Lansing to remove the income tax proposal from the ballot. The city council would have to call a special meeting to do that.

“Maybe it’s time for cities to get back to their core functions: infrastructure, safety,” Japinga said. “I think cities have gotten out doing noncore services and it’s draining the treasuries.”

Japinga also said that growing retiree pension and health care obligations are draining the city’s treasury.

“I know with the pensions, these things are protected. ... But when it comes to retiree health care, there are solutions out there to deal with these issues,” he said. “It’s not the politically great thing to do, but that’s what these folks are elected to do.”

A March 2017 newsletter to residents from the East Lansing government discussed a proposal to institute an income tax while reducing the city’s property taxes. The newsletter claimed that property tax revenues are not enough to maintain the current level of services provided by the city. According to data from the Michigan Department of Treasury, East Lansing’s property taxes are the 41st-highest among cities in the state.

The newsletter does not mention that East Lansing’s general fund revenue increased from $33.0 million in 2013 to $33.5 million in 2016. Further, total funding for all its municipal functions rose from $45.1 million to $46.9 million over that period.

The city estimates that the proposed income tax would generate $10 million in revenue for its treasury.

Besides the income tax, other strategies discussed in the city newsletter include a public safety millage for fire and police services, consolidating services with neighboring communities and a 5 percent budget reduction for all city services.

In addition to fire and police services, East Lansing also operates an aquatic center, a children’s theater, a community center, and multiple sports programs.

East Lansing City Manager George Lahanas did not return calls or an email requesting comment.