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Jul 26

Regression

Comments (0) 12:00 AM posted by admin |

Tonight’s special meeting of the Ypsilanti City Council was fabulous. I wanted to hug someone when it was over. Everyone in the room saw that Ypsilanti has a serious problem and everyone wants to work to solve it. Maybe I was drunk. I had the sneaking suspicion someone may have slipped me a roofie before I left the Idle Hour to attend the meeting. Someone definitely slipped something in my Pink Lady, but it’s possible it was just a cigarette butt.

The Blue Ribbon Committee on City Finances presented their report to City Council tonight and it was an overwhelming success. Chairman Paul Tait gave a great presentation. Members of City Council asked some very good questions. Those members of the Committee present added some very important information (such as local business owners will NOT be taxed twice). It was amazing. I still want to hug somebody.

You may recall that I recently criticized the BRCCF because their recommendation was so wishy-washy. Well, wishy-washy worked tonight. They said they were not wedded to the idea of a 1.0% income tax on residents and corporations, a 0.5% income tax on non-residents, a $1000 exemption level, and a 2.0 mill rollback on property taxes. They encouraged City Council to explore other scenarios especially the Kock-Strong Addendum of 0.8%, 0.4%, $1000, and no rollback on property taxes. I was floored, but in a good way.

I had planned to say a few words when it came time for audience participation, but my thunder had been stolen so I winged it and probably didn’t make much sense. My fear in all of this is that City Council is rushing this process because everything needs to be approved by August 15th in order to get on a November ballot. If we wait and have a special election in February or May of next year, it will cost the City an additional $40K they haven’t budgeted. The problem I have with rushing is that while the City may save the $40K cost of a special election, they stand to lose $2.5M if they put an inferior proposal on the ballot and it’s defeated. It makes sense to take the time and put the best proposal before the voters.

Besides being regressive, I tried to point out that the ordinance as written is mathematically flawed. There is this 2.0 mill reduction in property taxes there for political reasons (i.e. throw a bone to homeowners), but you can actually save homeowners more if you get rid of the millage reduction, reduce the deduction limit, and reduce the overall income tax rate. If you plug numbers into the revenue model developed by Rodney Smith of the Ypsilanti Courier, you can test the proposal of a 0.78% income tax on residents and corporations, a 0.39% tax rate on non-residents, a $600 exemption limit, and NO millage rollback. With this proposal, you also get rid of the regressive nature of the tax and make it fair for renters.

I don’t want to bore you with the math, but the deduction and millage rollback are actually red herrings that sound like they should save but do not in reality. If the City were to reduce the millage, they would lose revenue. In order to make it back up, they would have to raise the income tax rate. Same thing goes for the exemption level. A $1000 limit sounds like it’s being fair to families, but even at 1%, the difference between a $1000 and a $600 exemption is only $4 per exemption. To make the numbers add up, the City would need to have a higher income tax rate if they had a higher exemption. eMail me if you have any questions. Seriously. That goes double for members of City Council.

Fundamentally I am against an income tax. I’ve talked at length enough about my reasons, so I’ll spare you. I believe this will get on the ballot one day, so I want to make sure the most equitable ordinance gets passed. City Council needs to table this measure at next Tuesday’s Council meeting. They don’t understand the issues well enough to make informed decisions. To their credit, they were asking questions that had never even been considered by the BRCCF. The information exists. I’m not saying they need to spend more money on studies. They just need to wade through the data. They can’t do that in seven days.

We’ll see where it goes. For a change, I have some optimism. It’s a really weird feeling, but that’s probably the roofies.

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