11 September 2025
Michigan's a home rule state...but it doesn't allow local tax options. What?
#FactsMatter, the Citizens Research Council of Michigan podcast
About
Guy and Eric Lupher delve into the weeds, discussing the pros and cons — more pros — of allowing local units of government in Michigan to have a local tax option. Michigan is one of just a few states that doesn't allow local governments to levy a local tax without state legislative approval. Most states, including those with conservative leadership such as Indiana and Ohio, provide multiple means for their local governments to raise revenue for their local communities.
One unintended consequence of the prohibition on local tax options is intense pressure on Michigan property taxes, which are among the highest in the nation. Michigan relies too heavily on property taxes for nearly all local government expenses.
"In simple terms, cities and villages should have the ability to determine how they want to operate. They can decide things like how many city council members there should be, whether they should elect or appoint the clerk, and all kinds of other details and niceties related to state and city operations. But these cities cannot choose to levy an alternative tax. They're at the mercy of the state."
The Legislative Power Grab of 1963
Guy and Eric go back to 1963, when the current Michigan constitution was enacted by the people, granting home rule powers and giving cities the authority to levy taxes beyond the property tax.
"But the ink wasn't even dry on the Constitution before the legislature jumped in and said, 'wait a second, you can't do that unless we say you can do it.'"
Was it a power grab? Or was it a statement from the Legislature that it didn't trust the city of Detroit, Flint, or other big cities to be responsible in how they levy these taxes?
"It was both a power grab and putting the foot on the local governments. Just three years before that, Detroit was the first city to levy a local income tax. It didn't need it at the time, nor did it request authority from the state to do so. So I think state legislators were a little gun-shy, right? If Detroit is going down this path, what other cities will follow?
"So yes, it was a power grab; and even back then they had the idea of limiting taxation, but it was also a way to tell local governments, ‘You’re creatures of the state and we, the state, will decide how much power you should have.'"
One unintended consequence of the prohibition on local tax options is intense pressure on Michigan property taxes, which are among the highest in the nation. Michigan relies too heavily on property taxes for nearly all local government expenses.
"In simple terms, cities and villages should have the ability to determine how they want to operate. They can decide things like how many city council members there should be, whether they should elect or appoint the clerk, and all kinds of other details and niceties related to state and city operations. But these cities cannot choose to levy an alternative tax. They're at the mercy of the state."
The Legislative Power Grab of 1963
Guy and Eric go back to 1963, when the current Michigan constitution was enacted by the people, granting home rule powers and giving cities the authority to levy taxes beyond the property tax.
"But the ink wasn't even dry on the Constitution before the legislature jumped in and said, 'wait a second, you can't do that unless we say you can do it.'"
Was it a power grab? Or was it a statement from the Legislature that it didn't trust the city of Detroit, Flint, or other big cities to be responsible in how they levy these taxes?
"It was both a power grab and putting the foot on the local governments. Just three years before that, Detroit was the first city to levy a local income tax. It didn't need it at the time, nor did it request authority from the state to do so. So I think state legislators were a little gun-shy, right? If Detroit is going down this path, what other cities will follow?
"So yes, it was a power grab; and even back then they had the idea of limiting taxation, but it was also a way to tell local governments, ‘You’re creatures of the state and we, the state, will decide how much power you should have.'"