Objective Assessment of Tax Options // Eliot Singer

I will leave it to East Lansing government to explain why it spent $20,000 tax dollars hiring a private consultant to conduct a scientifically worthless survey of tax options, when if it really wanted unfettered public input, it could have gotten that for free by asking neighborhood associations to hold town hall meetings, with members of Council in the audience in their capacity as citizens. Tabulating data when the data is not scientifically obtained is pointless. The first, and most important, thing I learned about computers back in the stone age (c. 1970) was GIGO: Garbage in, Garbage out!

For a fraction of the cost, the city could have hired a qualified pollster to conduct a scientific poll, probably along the lines of rating various income tax or property tax options on a scale of 1-5. However, unless the public had a good prior understanding, even that kind of poll isn’t very helpful.

From an analytical perspective, the most important thing would be for homeowners, who are the bulk of the voters, to understand the cost to them of various options. Under the new federal tax law, almost no one filing jointly in East Lansing (or Michigan) will be itemizing deductions, with a $10,000 limit on deducting state and local taxes. (You would need to have a mortgage interest payment of ~$14,000, which with years of low mortgage interest, would probably mean having bought a house of $400,000 to reach that amount, which would in and of itself put you over the $10,000 in state and local taxes.) So, any tax increase will not be mitigated by federal tax deduction.

Another point is that an earmarked tax increase, say for pensions or parks, merely frees up general fund money currently spent on those. Like with the library millage, a parks and recreation millage or a public safety millage (many municipalities do have earmarked millages) would better protect those public services but would do nothing to control general fund spending, unless accompanied by an equivalent decrease in general fund millage.

It is pretty easy to figure out cost to taxpayers of income tax versus property tax increases, with retiree income being the main deductible for income tax. Personal exemptions sound more important than they really are. Generally, for an individual or couple with $100,000 income and $200,000 home, a 1% income tax would be a $1000 tax increase and a 5 mil property tax increase $500. The defeated proposal with 1% income tax and about 4 mil decrease would have been about a $600 net increase. Actual median family income (excludes MSU students) in EL is in ballpark of $80,000, median single family home about $180,000.

There is no doubt the defeated proposal was the best bang for the buck for most homeowners.

I do want to call attention to the Act 345 pension millage option. Most municipalities that have adopted this do not seem to have a cap, which could lead to a substantial increase in the millage with increased pension costs. But it does seem to be possible to cap at time of voter approval.

http://msue.anr.msu.edu/news/fire_fighters_police_officer_retirement_act_345

Eliot Singer

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