Committee OKs bill to require withholding of income tax from Detroiters who work outside city
Michigan legislators took a step Wednesday to help Detroit collect unpaid city income taxes from residents who work in the suburbs, a move linked to efforts to persuade Democrats from the city to back an elusive $1.2 billion road-funding plan.
Legislation overwhelmingly approved by the Republican-led House Tax Policy Committee would require employers to withhold city income taxes from the paychecks of Detroit residents. Businesses with fewer than 10 employees and less than $500,000 in wages would be exempt.
Another bill sent to the full House would give the state audit and other enforcement powers when it takes over Detroit's income tax collection in 2016 — which has been planned under the city's emergence from bankruptcy.
Mayor Mike Duggan, who testified for the bills and has been involved in road-funding talks, said the city could take in another $10 million a year if the legislation is enacted.
"In Detroit, that's a lot of money," he said. The city income tax is 2.4 percent for residents, 1.2 percent for non-residents who work there — the highest rates among 22 cities that have income taxes.
The timing of the committee's votes is no coincidence. Republican leaders are lobbying Detroit Democrats in the House to support the $1.2 billion road-funding plan this week with an unspecified gasoline tax hike.
Rep. Wendell Byrd, D-Detroit, the sponsor of one of the income tax collection bills, said Detroit is obligated to step up its collection efforts under a bankruptcy agreement. He declined to comment on whether the legislation's passage would be enough to garner his vote for the transportation funding package, but said he still has concerns, which he did not specify.
Democrats broadly are concerned that dedicating $600 million a year in general funds for roads would hurt other budget priorities.
"This is one small piece of a broader conversation," Duggan said.
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