Mandated City Income Tax Collection Bill on the Move

November 14, 2016

Regardless of your opinion about the outcome of last week’s election, one thing that is clear from job providers in the ensuing week is that government mandates and over-regulation are damaging the ability of employers to grow and create jobs! The Michigan Chamber has been a leader in the fight against harmful state policies that increase the cost of doing business in Michigan and we will continue to fight on your behalf in the remaining and forthcoming legislative sessions.

Unfortunately, it appears some Michigan lawmakers are not listening to the message that resonated loud and clear on, and after, election day. Despite widespread business community opposition, the Michigan Senate Government Operations Committee last week moved on legislation that actually adds more government mandates and administrative burdens. The committee passed Senate Bill 1127 which would mandate suburban and out-state employers to become the tax collectors for cities with an income tax even if they have no operations there. The Michigan Chamber is adamantly opposed to SB 1127 (Senator Geoff Hansen, R-Hart) because this legislation would add significant costs and administrative burdens to employers and expose employers to unknown liabilities, harsh penalties and never-ending audits. 

Several cities are complaining that they are losing revenue because they are ineffective at collections or due to taxpayer fraud. Not surprisingly, the solution of government is to further burden job providers by shifting governmental responsibilities to business even though businesses may not be connected in any fashion to the city at issue.

In the Michigan House, HB 4829 has been introduced by Representative Al Pscholka (R-Stevensville) which is a slightly modified version to mandate this withholding but applies only to Metro Detroit employers. The Michigan Chamber is strongly opposed to both versions as they would be equally damaging to employers who have no connection to the cities at issue. We encourage members to review this background piece because while you may think “I already withhold taxes…what’s the big deal?,” we encourage you to consider that city income taxes are a whole different animal; city rates vary across the state, employers would be liable for errors unless and until the employee pays the tax, employers pay the penalties and interest even if an error is corrected, and last but not least: you’d open yourself up to enforcement and city tax audits even though you otherwise have nothing to do with that city.

We encourage you to send an Action Alert to your legislators today and urge them to reject this attempt by cities to shift their responsibilities to your company. 

For questions about this issue, or other tax-related topics, please contact Tricia Kinley at tkinley@michamber.com