The city council took up the issue of a possible income tax last year upon the suggestion by a citizen budget review committee. The council doled out $30,000 to fund a study by the University School of Public Policy to determine possible financial repercussions on city commerce. Voters have to approve a city income tax for its implementation.
Under the city's charter, property taxes would drop if a city income tax is created. Because of this, the University's study found that local businesses would see a 30-percent decrease in taxes if the city implemented an income tax. However, the Ann Arbor Area Chamber of Commerce disagreed, stating that the mere specter of an income tax caused many local businesses to consider moving elsewhere. The city council should not threaten the city's businesses - eliminating the income tax question from the table works to help ensure businesses that their welfare is important to the city.
The tax also held many potential negative effects for University students. Loans, scholarships, grants and work-study are all taxable income. Under the city's tax, students needing financial aid the most would have to pay the city for the money they use to subsidize their education. Students face enough financial difficulties already - adding on a city income tax would compound their problems.
Many students work part-time to help subsidize some of their expenses. If businesses left the city because of the tax, students could have a harder time finding employment. In addition, their paychecks would also shrink because of the tax - extracting a little more from students' pocketbooks. The city council's decision eliminated a severe threat to students' bank accounts - it deserves commendation for its work.
In abandoning the income tax as a revenue source, the city council stated in a resolution that it would work to maintain services provided by the city with the current funding. The city has $9 million in savings - indicating a healthy economic status. The city should work to be as efficient as possible to prevent city taxpayers' dollars from going to waste. It should not seek additional funds unless present service levels would suffer. The city council should find creative solutions to maintaining city services without raising taxes.
The city income tax posed a threat to many of the city residents. Some students may have taken larger loans to compensate for the loss in financial aid and wages. The absence of city businesses would also pose a significant threat to the city's economy. The city council successfully averted economic problems by removing the city income tax from consideration.