It used to be that a penny saved was a penny earned, but Michigan’s revenue sharing program ensures that a penny taxed is two pennies received for some privileged cities.
The 27-year-old program was established to help local governments diversify their revenue sources.
Each year over a billion dollars of state sales tax money is divvied up among Michigan cities, villages, townships, and counties according to a controversial formula based partly on how high local taxes are.
Detroit, with the state’s highest taxes, will receive this year almost a quarter of the entire revenue sharing fund—or $323.00 per resident—even though it has only 11 percent of Michigan’s population.
By contrast, lower tax Grand Rapids, the state’s second largest city, will only receive $122.00 per resident.
This has led some lawmakers to question why cities that raise taxes are rewarded while those promoting economic growth through low taxes are punished.
A bipartisan task force is meeting this year to consider a more equitable distribution formula for the program. Members of this task force should insist that fairness and sound economics be made part of the revenue sharing equation.
For the Mackinac Center, this is Catherine Martin.