Replace the City Income Tax?

[Talking Up GR]

I'm finally organizing everything for my trip to the tax man this Friday. Out of curiosity, I picked up a copy of the GR Income Tax form, and, well, I am not happy.

In almost every other place I lived (and none with a CITY income tax, mind you) you claim your adjusted income from your federal tax return onto your local (state) return and pay the taxes based on that. If I am reading this right, we pay one hell of a penalty here in GR to own homes. There is no provision for deducting either property taxes paid or interest on a mortgage. Apparently I am also penalized for the type of business I run in my home... since I am technically not an "outside salesman", I am not allowed to deduct the costs of doing business that the federal government allows me to deduct.

Since I will most certainly end up owing $100 or more from the looks of it, I also see that I must - by law - make quarterly payments to the city. On $100?

The city has got to realize that this is costing them in the long run. A simple addition to the existing taxes to collect money from people who come into the city for shopping and entertainment would certainly raise the necessary money without having to pay for a department to process it. Not only that... maybe it would spur home values if people were to actually WANT to own the homes here without being penalized to do so.

That cute little post card I got from the city about the taxes probably should be sent BEFORE you buy property and take a gamble on an up-and-coming neighborhood. To think I passed on EGR in an attempt to "save on taxes" ! I'd have schools I could send kids to, reasonable appreciation on my home, and less of a penalty for owning and maintaining it in the first place.

[AlexPKeaton]

I tend to agree. Having to fill out yet another tax form is just annoying, especially a local one where there is unlikely to be any useful tax software. The only reason even bother to file with Grand Rapids is that I used to work in Walker, and I could credit my Walker income tax to my Grand Rapids tax. After this year I probably won't bother since I'm not self-employed and what is deducted from my paycheck will cover my taxes.

Though, now that you mention it, I have been contemplating self-employment.

[Rizzo]

Is this a topic for reducing your cost to live in GR or to simplify the way you pay your dues? Wouldn't it be easier and more appropriate to just simplify the tax? Filling the 07s weren't too complicated, however that was without real property.

If you wanted to make up the difference with a municipal sales tax it would require specific legislation, which I think is currently unconstitutional. I'd think the argument against a city sales tax is that retail business would be driven to very nearby suburban markets.

[PBJ]

I tend to agree. Having to fill out yet another tax form is just annoying, especially a local one where there is unlikely to be any useful tax software.

[rallymatt]

I used TurboTax for my taxes this year.. and it filled out the GR form.. I just have to mail it in with my money owed..

[AlexPKeaton]

Last year when I tried to use TurboTax for my city tax there was nowhere to enter my credit for my Walker tax paid. Maybe that's changed, or maybe I just couldn't find it, but it was going to make a difference of a couple hundred dollars.

[Raildudes dad]

Last year when I tried to use TurboTax for my city tax there was nowhere to enter my credit for my Walker tax paid. Maybe that's changed, or maybe I just couldn't find it, but it was going to make a difference of a couple hundred dollars.

[egrguy]

In regards to the poll question I voted for an increase in the hotel tax as that's the easiest option of the group (other then enjoying paying local taxes).

I think it would be better for the city in general to eliminate the income tax.

[GRDadof3]

If you raised the hotel tax, you'd have a lot of backlash from the county, which collects the current hotel tax to help pay for the debt on the convention center and arena.

But I agree, having a city income tax does make the city less competitive. I think a lot of people hold a very special place in their hearts for income taxes (as opposed to other taxes).

[snoogit]

This poll has absolutely no bias at all! Truly remarkable how neutral it is on the issue of taxation!

Theres nothing wrong with the tax system here. NOTHING. I like it the way it is, and I hope that it never changes.

[jas49503]

Is this a topic for reducing your cost to live in GR or to simplify the way you pay your dues? Wouldn't it be easier and more appropriate to just simplify the tax? Filling the 07s weren't too complicated, however that was without real property.

If you wanted to make up the difference with a municipal sales tax it would require specific legislation, which I think is currently unconstitutional. I'd think the argument against a city sales tax is that retail business would be driven to very nearby suburban markets.

[Sailor]

It seems to me that the city's funding system and budget need an overhaul. As discussed elsewhere, the funding allocated for road repairs is embarrassingly inadequate. The income tax does place a burden on those who own property and work in the city limits. (I'm a property owner myself; I live and work in GR.)

I know all too well what an excessive sales tax can do. I lived in Chicago for the better part of ten years. So, yes, putting a limit on municipal sales tax (e.g., no greater than 2% over the state sales tax rate) is a smart thing to do.

That said, I think Grand Rapids is missing the financial boat by not moving to take advantage of the outside money brought in by visitors to the convention center, the hotels, the increasingly cool downtown, and the medical centers. A small hotel tax and a small sales tax certainly is one way to do it. I'd be in favor of both.

[Talking Up GR]

Theres nothing wrong with the tax system here. NOTHING. I like it the way it is, and I hope that it never changes.

[jeang]

I don't know about nothing wrong with the income tax. I don't own property but here's how I see it...I miss just having a huge sales tax 8.25% and then paying federal taxes. The plus was every now and then we had tax-free weekends on items usually around back-to-school time.

Speaking of all the forms, I don't know if we'll ever go to a paperless society but that's another thought all together.

[Rizzo]

You better be careful what you wish for when talking about municiple sales tax. In Illinois communities can add taxes if they want and now chicago has a 10.25% sales tax. most of the other communities around chicago have added thier own also so very few have a sales tax less than 8%. the state sales tax is 6.25%.

chicago and cook county run at a continual deficiet and just raise taxes when ever they want to cover the difference. it hasn't seemed to hurt development, but there will come a time when it does. the thing that saves chicago is that whenever the city adds a new sales tax the surrounding suburbs seem to add thier own also.

[snoogit]

I take it you don't own property?

[Libertarian]

Just hate paying sales taxes. You'll find I'm vehemently opposed to laughable "fair sales taxes" that are really just hyper-regressive taxes in disguise. I won't get into details about that, but lets just say I'd take an income tax over a sales tax/hotel tax anyday. With the way things are going the last thing we need to do is to give people a reason to stop using services and buying products.

[snoogit]

Why, because you know your argument is made up of fallacious statements and platitudes? I think you happen to enjoy the rest of us subsidizing your conspicuous consumption.

[GRDadof3]

No because thats not the point of this thread, and I will honor it by not going off topic.

Now for something on topic:

If there is a regional sales tax, what is to stop people from skipping that tax and shopping online? A lot of people I know shop online to avoid sales taxes, including myself. With the advent of online shopping, it's almost impossible to track total sales taxes unless there's a big enough beauracracy to track this, and I don't think the city has the tools to do this.

One other note: who says that business wants this to happen? remember the howling over expanding the sales tax? I have a feeling that it would be just as loud as before if you tried that here. If business howled at expanded sales taxes, you can bet they'll howl again if you try to replace an income tax with a sales tax. I prefer to keep my businesses happy.

[aowwt]

Personally I think if Grand Rapids were to eliminate the city income tax it be great. But then how do you pick up the slack. My first thought is Property taxes. The way I would do it is by setting 3 types of property taxes. The first would be housing property tax. The next would be a non housing property tax. The last would be a hybrid property tax. The hybrid would be for mixed use land developements and the like. Now according to the state you can not bundle all of the property taxes into one but rather they need to be seperate. I think if they did a public safety one, a sidewalk one, a park one, and if they can a street one. I would suggest that the housing be set in the middle, the non housing about 25% higher and the hybrid 50% less than the pure housing. The reason for the hybrid is to create more mixed use developements which brings in jobs and people all of the time. Now I am not sure how much each should be but to give an example here is wyomings.

General Operating 4.6695 max 5

Fire .75 max .75

Police 1.24 max 1.25

Parks and Rec 1.5 max 1.5

Sidewalk Snow Removal .15 max .2

Yard Waste .12 max 3

Library .08 max .39

Debt Service .29 max required

Street, Sewer, and Water Improvements 1.8678 max 2

Now the max is what is allowed by either by the city charter or state law. Of course the charter can get changed by a millage vote. What I would suggest is to do something similar. The sidewalk snow removal could be increase for the bussinesses by just saying those would be done with hot water piping in the DDA. But when you get into the numbers the issue is this. The city takes in 55 Million alone in city income taxes. That amount is huge when you try to replace it with a property tax alone. The 2007 taxable property amount was 4,323,802,406 and if you try to get around 60 million out of that you are looking at 13.5 mills on top of the 8.1 mills already being paid.

I got all of these numbers off the audit reports so if you want some links I will provide them for ya. In any case I think what this boils down to is if you want the income tax removed you have an option in a property tax amount. If you do go that route I would suggest one thing. Split it up in seperate groups. Make it so that all have to pass to get the income tax removed. I would also suggest that a large percentage to be used for general operations so that if one fund needs extra income you can transfer money into it without leveeing more taxes.

[Raildudes dad]

The first would be housing property tax. The next would be a non housing property tax.

[snoogit]

That was a tax on services, not on retail sales. The main objection was that it was a silly idea, was not spelled out very well (companies didn't even know how to file for it, and how to charge their own subcontractors, or why it favored some businesses over others) and it was doomed to failure from the beginning.

I do agree that people will shop online more, but that's already happening. But a 1% sales tax means a $100 item would cost $101. I'm no economist, but I think there's some inelasticity of demand for that small of a price change. And if it covered the entire Kent County area, there's really no place to go shop to save that $1 (Holland, Muskegon?). Plus, you're going to pay more than $1 for shipping when you shop online, and more than $1 for gas to travel outside the market area. Not to mention that shopping online does not equal 0% sales tax.

If it means better roads and more mass transit, I'd easily pay 1%. Maybe more.

Although, maybe I'm in the wrong thread for that (?). If this is just about replacing the city income tax with a city sales tax, I think it's a bad idea. Most retail sales in the metro area happen outside the city, and that trend would probably increase IMO.