East Lansing has a city income tax for the first time this year. It was passed by voters in 2018 after a previous iteration was defeated in a referendum several years before. Many of the candidates running for council this year support the income tax, but how much revenue the tax will net for the city remains largely unknown.
One fifth of the revenue generated will go toward police and fire protection, the same fraction will go toward infrastructure and the remainder will go toward payments for unfunded pension liabilities. All East Lansing residents pay a 1% income tax and non-residents working in East Lansing pay a 0.5% income tax.
The tax was controversial among students and Michigan State employees, but it still passed.
John Revitte is running for one of the three seats on the East Lansing city council. Before moving to East Lansing, Revitte lived in Lansing which had a similar income tax to the current East Lansing one, so he said he doesn’t think the new tax is too demanding.
"I think there's enough reality that having people in East Lansing, and they're not just passing through, there's real cost to the city and to have them pay 0.5%. I don't think it's that terribly unfair, but we need to educate them so they don't feel angry about it and make sure it's clear what East Lansing is providing."
I do not think it is that terribly unfair, but we need to educate them so they do not feel angry about it and make sure it is clear what East Lansing is providing.
24 cities in Michigan have a non-resident income tax, most are 0.5%. However, there are four cities with non-resident income taxes larger than East Lansing’s, including Detroit with the largest non-resident income tax at 1.2%.
In 2015, a similar income tax reform was proposed but failed to pass. Council members like current Mayor Mark Meadows and Mayor Pro-Tempore Erik Altmann, worked to get it passed. Now that the income tax is in effect, Altmann said he is pleased with the results.
“And now, four years later, we have an income tax and it’s doing exactly what it’s supposed to be doing. Our collections are right on track, we’re hiring back police and firefighters.”
However, some aren’t as happy with how much revenue the tax is yielding. Warren Stanfield III is a student at Michigan State University running for one of the four year terms on the council. He said that if the city doesn’t bring in enough money, it could lead to a city-wide problem, especially for public services.
It is a testy situation. You know if we are not bringing in that amount of money, then that is the problem we are all gonna face together, but it is definitely a problem.
“It’s a testy situation. You know if we are not bringing in that amount of money, then that’s the problem we are all gonna face together, but it’s definitely a problem.”
Like Stanfield, candidate Lisa Babcock said she also has concerns where the tax revenue is going.
“It’s also really incumbent now on the city council to make sure that the money raised in that income tax is used in a responsible way that covers the obligations that it was intended for. And it’s also really important that the city council not use that money as a hedge against tax breaks for developers, but remember that we also need to take in revenue from development.”
Jessy Gregg agrees with her fellow candidates She supports the new tax, but she said she doesn’t think it’s bringing the city as much money as they expected.
“You know the revenue it was expected to generate is not as high as we were thinking it was going to and then we have the 40% of it that is entailed to other services so really the amount that is going toward our pension is quite small.”
According to incumbent and current mayor Mark Meadows, it might take a while before the impact of the new tax is able to be measured.
You gotta go through one whole year of collection and then refund before you really realize what the revenue is going to be.
“You gotta go through one whole year of collection and then refund before you really realize what the revenue is going to be and in the meantime, we’ve lowered property tax by, if you include all of our city’s services, then we’ve lowered them by about 26%.”
The tax will be up for renewal at the hands of the voters twelve years. That means whoever is elected to the new city council is unable to manipulate the income tax for now.
There’s no data yet on how much money the new income tax will bring into the city. In estimates used by East Lansing, it could be an extra $10 million in tax revenue, which, when offset by the decreases to East Lansing property taxes, means $5 million extra in the bank.
The main factor will be time, and the city council in 2031 will determine if the tax was effective or needs to be adjusted.
