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Michigan could allow cities to piggyback on state tax system

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The Michigan Treasury is working on a plan to let local governments use the state’s system to collect income taxes.

The idea was hatched initially to help Detroit recoup about $140 million in uncollected income taxes from people who live in the city, but work in the suburbs, says Governor Rick Snyder. 

“We were looking originally at doing it with Detroit, but as governor of Michigan, I want to look at it and say, how do we provide service across our state? So it could be for other communities, if they want to,” he said.

“The idea is, we do tax collection. For a city to have a whole system for doing that separate(ly), and separate forms and everything else is not necessarily an efficient answer, and it applies to over 20 cities in our state. So is there a way we can piggyback it into the Michigan income tax system, the state system, and save them money on administration and, hopefully, make collections easier and better.”

The governor says that would also make it easier on taxpayers, who would have to deal with one form instead of two.

Collecting taxes from residents who leave their cities to go to work is a common challenge for the 20-plus communities that levy local income taxes. The governor says the system should be ready in 2016, when people file on next year’s taxes.

Local officials say they like the idea of making tax collections more efficient and easier for taxpayers, but they’ll want assurances the state will only act as a pass-through and not skim off some of the revenue. Local officials have long complained the state shortchanges municipalities when it comes to revenue sharing, especially during tough economic times. 

Rick Pluta is Senior Capitol Correspondent for the Michigan Public Radio Network. He has been covering Michigan’s Capitol, government, and politics since 1987.