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An income tax is a tax levied by a government directly on a percentage of income; it’s typically an annual tax on personal and business income. For a city income tax, the percentage is established at 1% for residents and .5% for non-residents.
Yes. With the approval of the income tax proposal, the City Charter amendment approved by voters in November 2017 will go into effect, reducing the City's operating millage by 5 mills. This reduction in property taxes will lessen the impact of the income tax on property owners and, in some cases (i.e. retirees exempt from the income tax), the overall amount of taxes paid will decrease.
Residents and non-residents working in the community will pay the income tax. Residents will pay a 1% income tax and non-residents will pay a 0.5% income tax. There will be $600 deductions for each personal and dependency exemption claimed and some income, such as retirement income, will not be taxed. If an individual lives in East Lansing and works in another community with an income tax or works in East Lansing and lives in another community with an income tax, they would pay 0.5% to East Lansing and 0.5% to the community in which they work or live. Some income will be exempt from the tax. Learn more.
Income exempt from the income tax includes retirement income, unemployment income, military pay, tax refunds (city, state and federal) and more. For a more exhaustive list of income exempt from the City income tax, click here.Additionally, individuals who make less than $5,000 annually and do not have a personal exemption because they are claimed on someone else’s taxes would be exempt from the income tax. This would apply to students who are still claimed on their parent or guardian's taxes.
Not without a vote of the people in years in which an income tax is imposed. The City Charter caps property taxes at 13 mills (currently 20 mills) in years in which an income tax is imposed. Any future increase above 13 mills in years in which an income tax is imposed would require another Charter Amendment, which would require another vote of the people.
If you are a resident of East Lansing who owns your own home, it will depend on your household income and the taxable value of your home. Your taxable income will be taxed at 1% and your total property taxes will decrease by about 10%. *Note that retirement income is not taxable locally, so seniors on fixed incomes who own their homes will, in many cases, see a reduction in their total taxes. Residents with specific questions about how the two Charter amendments will impact them may want to consider consulting with a local tax office/professional. A Taxpayer Impact Calculator For Residents is also available (for estimation purposes only).
According to Plante Moran’s Income Tax Study, the income tax is expected to produce approximately $10 million, but with an estimated $5 million less in property taxes as a result of the property tax reduction, the total net revenue is estimated to be $5 million annually to be used for the dedicated purposes outlined in the ballot language. The income tax will help the City to maintain its core services, make supplemental pension payments (the City is legally obligated to make these payments for retired City employees) and reinvest in City infrastructure and public safety.
The income tax will be implemented on January 1, 2019 and the property tax reduction will be seen on July 2019 tax bills.
Your income tax will be pro-rated by your employer based on the amount of time you worked in the East Lansing community. The tax will only apply to the income earned while working in East Lansing.
It will be collected by employers. Residents working in other communities without an income tax would need to file with his or her employer a form on which the employee states the number of exemptions claimed, the city or residence, the predominant place of employment, and the percentage of work done or services performed in the predominant place of employment. The same is true for residents working in other communities with an income tax.
In addition to East Lansing, 23 other Michigan communities have an income tax. The communities with a standard 1% income tax for residents include: Albion, Battle Creek, Big Rapids, Flint, Grayling, Hamtramck, Hudson, Ionia, Jackson, Lansing, Lapeer, Muskegon, Muskegon Heights, Pontiac, Port Huron, Portland, Springfield, Walker and Benton Harbor. The communities that tax at a higher rate as permitted by statute include: Detroit, Grand Rapids, Highland Park and Saginaw. East Lansing's tax will never exceed 1%.
Mills, when added together, make up the millage rate for a City. The 2017 millage rate for owner-occupied residential homes in Ingham County and the East Lansing Public School District is 60.0410 mills (approximately 36 percent goes to the City and the remainder is collected for Ingham County, East Lansing Schools, Lansing Community College, the State Education Tax, the Ingham Intermediate School District, the Capital Area Transportation Authority and the Capital Regional Airport). The standard way to find out your actual tax amount based on the millage rate is to take that rate and multiply it by the taxable value of your property, then divide the result by 1,000.
Taxable value of a property is the value against which millage rates are levied to determine property taxes. Residents can find out their taxable value here. Taxable value can also be found on a resident’s property tax bill.
Income tax information is confidential except where a court orders the release of information. Council members will not have access to this information whether the City chooses to have the state administer the tax or a private contractor administer the tax. It will be no different than their Federal or State tax information. All filings are confidential per MCL 141.674.
425 agreements will not generally be impacted by the income tax. The agreements all contemplate the possibility of an income tax and designate the residents as City residents for such a purpose and designate the tax revenues as belonging to the City. The millage proposed to be assessed along with the income tax will still be above the various millage amounts required to be given back to the Townships under the revenue sharing provisions. The Townships will still get their share pursuant to the agreements regardless of an income tax.