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On Wednesday, the Ann Arbor News printed an article outlining the basic framework of Ypsilanti’s Blue Ribbom Committe on City Finance’s recommendation on an city income tax. On Thursday, the Ypsilanti Courier ran a more up-to-date article based on a revised draft of the report that is expected to go before City Council on August 4th. The gist of the recommendation is a 1% income tax on all residents and corporations, a 0.5% income tax on all non-residents working in the City, a credit of $1000 per exemption, and a 2.0 mill rollback to all property owners. The BRCCF will also recommend that this income tax have a five year sunset clause that would require voter approval in five years to keep it going should it ever make it on the ballot and get passed in the first place. While the exact wording of the report has not been completely finalized, the basic fundamentals are set in stone.
The City is predicting a $2.5M budget deficit every year for the forseeable future assuming that they continue to provide the level of services that we have become accustomed to having. You can write your own snarky editorial on why this has happened and who is to blame. The bottom line is that the citizens of Ypsilanti are going to be asked to pick up the tab. If you own property within the City limits, you’re probably thinking that you already do pick up the tab in the form of the highest property taxes in Washtenaw County. That may be true, but you’re going to be asked to dig deeper. Don’t worry though, this plan will also cause grief to the residents who rent. We will all soon be asked to share the pain even if some share it a little more than others.
I don’t envy the members of the BRCCF. They were asked to be on this committee because they all have special expertise in this area. The problem is, no one wants to be blamed should this proposal ever be adopted by the voters. For this reason, members of the committee were using wishy-washy phrases like “recommend that City Council consider an income tax.” Some members of the committee wanted to show income tax scenarios for “typical” Ypsilanti residents like single mothers with children who rent, college students who rent, married homeowners with two children, elderly residents living on fixed incomes, etc. There are other members of the committee who don’t think it’s their job to present these scenarios to City Council.
Give me a break.
I’m not going to pretend that all ten members of the committee are working an angle, but there are some thinly-veiled agendas. Some members may have political aspirations and don’t want to one day be labelled as someone who took a couple hundred bucks out of the people’s collective wallets. Other members may be the head of SEMCOG looking for a pilot program to champion an income tax in order to sell it to other communities. There are probably others who simply come for the chance at free cookies.
The way the committee settled on the variables of 1%, $1000, and 2.0 mills wasn’t rocket science. They picked 1% because all but four of the twenty-two Michigan cities that have an income tax use 1%. They picked the other two variables because the 1% will generate $3.9M in revenue and the $1000 exemption limit and the 2.0 mill property tax rollback will bring the revenue generated back to the magical $2.5M deficit. After sitting in on a few meetings of the BRCCF, I can say that I’m impressed with the committee, but their proposal was nothing short of disappointing. I say that because it’s not a creative proposal and because it makes the tax regressive. And that line is straight from the committee’s report (“the regressive impacts of a potential income tax on lower-income and renter residents“).
According to Michigan law, any city that implements an income tax must have at least a $600 exemption. With that in mind, there is a simple solution to the $2.5M revenue problem that doesn’t require a property tax rollback. If you got rid of the property tax rollback, you could tax everyone in the City at the same rate so that the guy who makes $150K and lives that enormous Victorian next to you pays the same percentage as the single mom with two kids who lives in an apartment near Visteon. On page 8 of their report, Plante & Moran told us that a 1% tax on residents and corporation and a 0.5% tax on non-residents with an exemption of $600 will generate around $4.0M of revenue. Their report should have told us exactly what percentage would give the City $2.5M. It should have, but didn’t. Twenty-two grand doesn’t get you what it used to back in the day. I wasn’t put on the BRCCF because my original solution to the City’s financial crunch was determined to be a pyramid scheme. But had I been, I would be be calling Mr. Rujan of Plante & Moran every 20 minutes until he gave me that figure. I’d then put that percentage in the recommendation and run with it. But that’s me. I’m a born romantic.
The one fascinating thing about all of this is that in order for this to get on the ballot for November, City Council has to pass an ordinance before August 29th. All ordinances require two readings with the first being on August 4th and the second being on August 19th. The BRCCF is meeting again this Monday the 18th at 6:30PM in hopes of ratifying the wording of the report. That would give City Council only two weeks to thoroughly understand the ramification of the plan. If the August 29th deadline is missed, there would need to be a special election sometime in February of 2006 and the City hasn’t budgeted for that. The one thing I’m not taking into consideration is that City Council could call a special meeting some morning at 7:30AM for the second reading.
The only plea I make to the BRCCF is that you should only make this recommendation if you believe in it. If you are recommending to consider or some other wishy-washy nonsense, vote no. If you do try and play the consider card, I know a couple of neighborhood kids who would egg your house if I recommended they consider doing just that.
NEW UPDATE: It should be made clear that at the BRCCF meeting on the 13th, Ingrid Kock voted against the language in the report and Deborah Strong abstained. The report says “respectfully submitted by,” but in the spirit of the delicate wordsmithing of the BRCCF, you shouldn’t read too much into that.
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