Table 1

Table 1 indicates Michigan's cities were quite varied in their levels of tax revenues and the direction of change of those levels from 1980 to 1990.[1] Both Detroit and Dearborn had per capita tax burdens above the national average as shown in Figure 1.[2] Sterling Heights, Westland, and Warren, were each more than 30 percent below the U.S. average for city own-source revenue collections.

As important as the level of taxes is, the change in tax burdens in cities is even more so. Where is the per capita tax burden growing the fastest? Table 1 and Figure 2 show:

  • Ann Arbor led the way with a 60 percent increase in tax burden. But, its 1990 per capita revenue total was still below the U.S. average.

  • Flint's own-source revenue growth was also above the national average, at 40 percent; Kalamazoo was close behind at 39%.

  • On a more positive note, two of Michigan's largest cities – Westland and Sterling Heights – had a real decrease in per capita own-source revenues during the 1980s. These two cities also had the lowest 1990 levels of revenue.

  • Even Detroit managed to hold per capita revenue growth well below the national average at 6 percent, although its overall tax burden is still very high. In 1981, Detroit raised its income tax rate from 2 to 3 percent, yet in the 1980s the city experienced virtually no increase in real income tax collections.

Property taxes are one of the most politically volatile economic issues in Michigan. Governor Engler's decision to sign legislation in August 1993 abolishing property taxes for schools focused national attention on the sky-high rates in Michigan.

Table 2 shows the 1990 level of per capita city property tax revenues for Michigan cities. The data shows that property taxes were at least 25 percent above the U.S. city average in Dearborn, Ann Arbor, and Warren. In the case of Warren, the property tax is the only major tax imposed locally.

The state of Michigan spends about $6.5 billion per year on financial aid to its cities.[3] Where does the money go? Table 3 shows that:

  • Thanks to the state's generosity to Detroit and Flint, per capita inter-governmental revenue rose by 26 percent in Michigan's 11 largest cities.[4]

  • Total per capita intergovernmental revenue from the state government to Detroit and Flint rose by 55 and 105 percent during the 1980s. This gave them 1990 levels of $518 and $576 respectively, almost three times higher than the next largest recipient. In fact, these cities saw per capita increases in the 1980s that were larger than what any of the other nine cities received in 1990 alone. Meanwhile, five cities – Grand Rapids, Dearborn, Warren, Kalamazoo, and Livonia – saw real cuts in per capita state aid.