Detroiters face another tax hike question, as the city considers a new sales and use tax.
A recent study from the Citizens Research Council of Michigan suggests that Detroit's proposed tax may not be worth it due to the limited revenue generated and significant barriers to adoption. The analysis estimates that the 1% sales and use tax could raise between $42 million and $72 million annually, which is only about 5% or less of the city's budget.
The study was produced at the request of the Detroit City Council's Legislative Policy Division, seeking innovative ways to increase city revenues without placing an undue burden on residents. The report argues that broader access to local taxes could improve the fiscal health of large cities and counties.
Detroit already has multiple local taxes, including a city income tax, casino wagering taxes, and utility surcharges, in addition to county and state levies. This layered approach means Detroit residents are among the highest taxed in the state, according to the report.
The study's authors suggest that estimating potential revenue is complicated due to Michigan not tracking sales tax collections by city and visitor spending being hard to measure. They employed two approaches: one based on household retail spending estimates and another attempting to capture a wider range of taxable activity beyond retail goods.
However, even if Detroit decides the money is worth it, a local sales tax would require major state action first. This includes amending the state Constitution, adopting new statutes, enacting an ordinance, and voter approval of a new tax.
The study's author, Madhu Anderson, notes that the path to adopting a local sales tax "is daunting" and may be better suited for levying at county or regional levels to maximize potential revenue and minimize economic disruptions.
Detroit is currently working on raising service levels in the coming years while planning for major obligations ahead. The city aims to put services "on par with surrounding communities," make pension payments that are again "a city responsibility after a 10-year hiatus," and capture economic benefits from growth in visitor activity downtown.
However, the report also highlights that Michigan's municipal finance structure relies heavily on property taxes that are limited by state law. This limits local governments' options to levy local taxes, especially in communities with weaker tax bases.
For now, the study does not urge Detroit to rush towards a ballot proposal to raise the sales tax. It leaves city and state leaders to weigh whether an additional $42 million to $72 million annually is worth pursuing a constitutional amendment, new statutes, a local ordinance, and a citywide vote.
A recent study from the Citizens Research Council of Michigan suggests that Detroit's proposed tax may not be worth it due to the limited revenue generated and significant barriers to adoption. The analysis estimates that the 1% sales and use tax could raise between $42 million and $72 million annually, which is only about 5% or less of the city's budget.
The study was produced at the request of the Detroit City Council's Legislative Policy Division, seeking innovative ways to increase city revenues without placing an undue burden on residents. The report argues that broader access to local taxes could improve the fiscal health of large cities and counties.
Detroit already has multiple local taxes, including a city income tax, casino wagering taxes, and utility surcharges, in addition to county and state levies. This layered approach means Detroit residents are among the highest taxed in the state, according to the report.
The study's authors suggest that estimating potential revenue is complicated due to Michigan not tracking sales tax collections by city and visitor spending being hard to measure. They employed two approaches: one based on household retail spending estimates and another attempting to capture a wider range of taxable activity beyond retail goods.
However, even if Detroit decides the money is worth it, a local sales tax would require major state action first. This includes amending the state Constitution, adopting new statutes, enacting an ordinance, and voter approval of a new tax.
The study's author, Madhu Anderson, notes that the path to adopting a local sales tax "is daunting" and may be better suited for levying at county or regional levels to maximize potential revenue and minimize economic disruptions.
Detroit is currently working on raising service levels in the coming years while planning for major obligations ahead. The city aims to put services "on par with surrounding communities," make pension payments that are again "a city responsibility after a 10-year hiatus," and capture economic benefits from growth in visitor activity downtown.
However, the report also highlights that Michigan's municipal finance structure relies heavily on property taxes that are limited by state law. This limits local governments' options to levy local taxes, especially in communities with weaker tax bases.
For now, the study does not urge Detroit to rush towards a ballot proposal to raise the sales tax. It leaves city and state leaders to weigh whether an additional $42 million to $72 million annually is worth pursuing a constitutional amendment, new statutes, a local ordinance, and a citywide vote.
... Detroit is trying to raise taxes again, which means their residents will have to pay more for stuff they buy or use. I don't think it's fair that they already have so many taxes on top of each other, and now they're considering adding another one? It seems like a lot of hassle just to get some extra money 
... I mean, is it really worth it if the city won't even have all the money in the end? The study says it might not be that much, but still... it's a lot of work and potentially hurtful for people who are already struggling 
. And what about the state Constitution? That sounds super complicated 
... I just don't get why they can't figure out a better way to raise money without making their residents pay even more 
i mean i get it we need more funding for services but 1% sales tax? that's just another burden on residents already paying thru the nose for everything from income to utility surcharges. and what's up with michigan not tracking sales tax collections by city? that's some serious state-level inefficiency 
They're already gettin' hit with like 6 different taxes already... 
And if they decide to push for it anyway, good luck with tryin' to pass it through the state legislature... 
I mean, the study says it's only gonna bring in like $42 million or whatever, which is peanuts compared to what they're already paying. And it's not like they don't have enough taxes already - they've got city income tax, casino wagering taxes, and utility surcharges too... it's like they're trying to squeeze every last penny out of the residents. 
It's just so much work for what? $42 million? That's not even enough to cover all the services they want to raise in the next few years.
! Like how are they even considering raising taxes again? It's already super hard for people to afford living in the city as it is. And now they're thinking of adding another tax that could potentially raise only like $42 million to $72 million annually? Come on, that's barely enough to cover a fraction of their budget 
It just seems so ridiculous. I hope city and state leaders can come up with a better solution that doesn't put the squeeze on residents even more 
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I mean, the city's already got a lot on its plate trying to improve services and whatnot. Do they really think an extra 1% sales tax is gonna make that happen? 
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. And now you're telling me that we need a constitutional amendment and all this other stuff just to make it happen? 
. Maybe we can find a better solution that doesn't involve adding more taxes on top of things 
. It's also worth noting that estimating revenue is complicated due to Michigan's lack of tracking sales tax collections by city 
. Perhaps it would be more effective for the city to explore other options, like partnering with surrounding counties or regions, to maximize revenue without disrupting the economy 
. I guess it's good that they're looking into ways to boost revenue, but do they really need another layer of taxes? I'm not sure... 
And don't even get me started on how hard it is to track visitor spending. It's like trying to count all the grains of sand on the beach or somethin'