Anti-income Tax Group Cites 'uncertainties

i This is the second in a serie ■ nf three articles prepared b mbers of the Truth in Tax in Committee, opposing ption of a city income tax F. Today's article was writby Co-chairman John Feldip. ;veral responsible groups e studied the local income question and reached this e conclusión. Barring a dus need for additional nue, an income tax should be adopted before a number lof uncertainties in our total tax Isituation are settled, certainly ■ not bef ore 1971. Mayor Wendell Hulcher's I bipartisan Blue Ribbon ComI mittee on City Finances was I the first to recommend this I course of action. In recent months its concluI sion has been supported by Isuch groups as the Board of Realtors - who would seemingly benefit most frorn the present tax proposal, the Chamber of Commerce, the Jaycees, and the City Republican Committee. In the face of such conviction ithat this is not the time for a fcical income tax, why has the Purrent administration pushed so hard for its adoption? The original justification was "equity." Taxpayers were told the purpose was not to raise more revenue, but simply to redistribute the ,tax burden along the lines of ability to pay. Two flaws in this argument soon appeared. First, for many taxpayers - especially renters - the proposal meant no more equity, just more money. Second, the tax package being proposed will raise more than a million dollars in new revenue -and not all of it from nonresidents by any means. The mayor made matters worse by lowering his property tax cut from 9 milis to V2 milis. He also proposes to make the income tax effective Jan. 1, while the property tax cut will not take effect until July 1. Thus we will all pay a doublé tax for six months. (The mayor says he intends to provide an extra IV2 milis for the second half of 1970 - but this is hardly a fair trade.) In short, the name _of the game is additional revenue. ■kVhy? Because the current P. administration has been living beyond the city's means. The city budget is already at record levéis. It's up more than 50 per cent over two years ago. Just seven months ago, the city was in a surplus position and City Council was considering a modest tax cut. But today, we are told the city faces a $402,000 deficit for the current fiscal year. Where has this deficit come from? For $64,000 no excuses are offered. City Council simply overspent the approved budget. Foranother $43,000 emergency public safety measures to cope w i t h recent ''civil disturbances" are blamed. For the remaining $295,000, Council says it overestimated revenues because of inadequate information. There is irony in this explanation. For the crux of it - inadequate information - is the basic objection of all the above groups to enacting an income tax at this time. Are we now to simply accept the argument of these same people that more niformation is not necessary, that we need the money and we need it now? Or are we to listen to other voices from throughout the community which counsel caution until we kñow the full effect of the 1970 census, revised city policy on user charges, and Gov. Milliken's educational tax reform proposals? Are we to ignore the discrepancy between the last City Council's assessment of our fis:al needs and resources and his council's? Or do we not have a right to demand tl.at proponents of the ncome tax prove their case? And to expect that the first Drder of business should be to aut the city's present fiscal louse in order by tightening upl )n spending, reallocating avail-l ible funds, and exploring 1 ïative revenue sources forl apital improvements? I believe we have not only al ight, but an obligation, tol emand this course of áctionl rom our elected city officials.I More money has never been al ure for unwise fiscal policy,! nd it isn't now. Part 3 ( Tl lis is the last in the series of articles. It was written by Prof. Ross Wilhelm.) There are four major reasons why I intend to vote against the city income tax. The reasons are: (a) the timing of the proposal is poor, (b) the city does not need the extra money the income tax will provide, (c) the income tax wiÜ cause unfair shifts in the burden of taxes, and (d) the city income tax is poorly designed for Ann Arbor's [fiscal needs in the 1970s. Timing Gov. Milliken is proposing ma■jor changes in the state income ■tax and in the property tax. President Nixon is proposing to change the sharing of federal tax revenues with the states and cities. The waters are too muddy for us to be changing our tax system now. Need Every major group which has studied Ann Arbor's finances has concludsd the city has no need for extra tax revenues. Yet, according to the supporters, the city income tax will provide about $500,000 extra for the city in tax revenues. Most of this, according to the supporters, will come from non-residents who work here. To argue we should collect this extra money simply because we can get it when there is no pressing need for the money is immoral and disregards the needs and feelings of those who will have to pay the added amount. It is true that the city has a temporary deficit in its accounts but this deficit can be eliminated without any extra money. The deficit arose first because the City Council planned its spending poorly and has overspent to Idate. The second reason for the I deficit is that some taxpayers Ihave been slow in paying their Itaxes. The council simply has I to reduce its spending between Inow and June. The slow paying Itaxpayers will pay up over the Icoming months. Mayor Harris Ihas argued the extra money is Ineeded for capital improveIments. However, such capital [improvements can and should be Ifinanced by bond issues, as they lusually have been, and not out lof current tax revenues. - I Fairness The city income tax is a flatl rate, proportional tax. The taxi is not progressive in its rates.l Every resident pays 1 per centl of his taxahle income - the richl do not pay a higher percentage I than do the poor. It is possiblej to argue that the rate is slightlyl progressive because of the $600 9 personal exemption. A $600 personal exemption w o u 1 d be a higher percentage of a poor man's income than it would be of a rich man's income. However, this is a trivial degree of progressiveness. By every reasonable test the city income tax P is not progressive. This measure will not significantly help the poor Ijy transferring the tax burden from them to the rich. Most residents will not pay higher! taxes, witb a city income tax and a cut in the property tax, than they now pay in property taxes. If most residents pay the II same then there is no help forl the poor by shifting the burdenl from the poor to the rich. A city income tax will, how-l ever, raise more tax revenuesl or the city - $500,000 extra ac-l cording to the supporters. This I money will come from people I who are Dot now paying taxes I o the city. A large proportion of I ;hose who will be forced to pay I added taxes receive low 1 comes. Those who will be forced I to pay more include: A) The residents of tax I empt housing such as I ty and public housing as well as I those receiving the veterans' 1 emption. These poor people will II have to pay the income tax to II the extent their incomes exceed I their deductions. B) Low income hospital and I service workers whose incomes I are rising f aster than other II comes and taxes will pay an I increased share of the tax 1 den. C) Renters will not receive II rent reductions which will II flect the reduction in the 1 ty tax; however, many of such i tenants wil! pay an income tax. I The supporters of the income I tax claim rents will decline inl one or two years as more hous-l ing is built here. Thus they sayl this inequity will be corrected. I However, it we accept their ar-I gument then this is an excellent I reason for postponing the in-l Icome tax for one to two years. I D) Non-residents who workl Ihere will be doublé taxed. Theyj ■ will have to pay our income taxi Iplus taxes in their own commu-l Inities. Many of these workersl are low income personsl hésúpportersárgue these I workers can deduct our income Itaxes f rom the income taxesl imposed by the city of their residence. This is misleading since few of our workers reside in cities which impose an lineóme tax. The simple f act is that we Iwill be taxing people who canInot vote here. We in Ann Arbor Iwouldbeseriously hurt leconomically if we could not lemploy non-residents. We need ■ these workers and no one Ishould have to pay a fee to Iwork here. I It is also accepted by the supIriorters of the city income taxi Ithat many Ann Arbor busiInesses will pay lower taxes if Iwe impose an income tax. How is it possible to say that ja tax which does not signifiIcantly shift the tax burden Ifrom the poor to the rich and yet which also forces many Ipoor people to pay more and Igives many businesses a tax Ibreak is fair? Flexibility The supporters of the income tax argue that the 10 per cent annual increase in tax revenues from the property tax is not sufficient and we require the 12 per cent annual increase which the income tax will yield. They argue the 12 per cent is needed to meet the added costs imposed by our growing population and to pay inflationary jwage increases to our city employés. The supporters ignore two facts h o w e v e r . First, our growth rate will decline in the 1970s as the surrounding communities obtain adequate water and sewers. Second, the inflation is coming to an end and we will not have to pay inflationary wage increases forever. It is not possible for the city to cut the city income tax rate- this is fixed by law. It is I possible, however, for the city ] to cut the property tax rate. As our population growth decreases and as the inflation declines, we will not need an annual growth rate in our tax II revenues of 12 per cent perj year. I -- -