LANSING, Mich. – The National Federation of Independent Business
(NFIB) has joined with job providers from across the state to speak out against
legislation that would mandate suburban employers become the tax collectors for
Michigan cities that impose an income tax on their residents. Legislation in
both the Michigan Senate (Senate Bill 1127) and House (House Bill 4829) would
penalize employers who hire residents of cities that impose a local income tax.
There are 22 municipalities in Michigan that levy a local
income tax. All of them tax both residents and nonresidents but charge
nonresidents a lower rate. The proposed legislation would grant the treasury
departments of these cities sweeping powers to require that employers police
their workers to be sure they are paying their city income taxes. Even
businesses that are outside the cities in question could be subject to audit
and penalties if the city believes that they have workers living within their
jurisdiction that are not paying the city income tax. This is yet another
attempt by local governments to mandate record keeping and enforcement
obligations on employers to make them nannies for local tax collectors. NFIB
will be working to defeat Senate Bill 1127 and House Bill 4829 in the lame duck
session.
“If cities are unwilling or unable to carry out the
responsibilities that come with imposing an income tax on their residents, then
maybe they should repeal the tax outright, said Tricia Kinley, Senior Director of Tax & Regulatory Reform for the Michigan
Chamber of Commerce. “Or, cities should work to improve their own
enforcement mechanisms.”
“The legislation should not be viewed as ‘just another
withholding’ that employers can easily do,” noted Jeff Wiggins, State Director for the Associated Builders and
Contractors of Michigan. “These bills would expose employers to unknown
liabilities and never-ending audits.”
“Senate Bill 1127 and House Bill 4829 are government-imposed
mandates on job providers in response to cities that complain they are losing
revenue because they are ineffective at collections or due to taxpayer fraud,”
said Amy Drumm, Vice President of
Government Affairs for the Michigan Retailers Association. “Shifting their
governmental responsibilities onto employers who otherwise have nothing to do
with the city in question is simply unfair.”
“This legislation would impose an administrative nightmare on
any employer who employs workers who live in cities with a city income tax,”
said Delaney McKinley, Director of Human
Resource Policy and Membership Development for the Michigan Manufacturers
Association. “What’s most concerning is that the job provider would be
liable for the tax debt as well as penalties and interest and enforcement actions
and audits.”
“Many Michigan employers, particularly small business, do
their payroll manually in-house; the complexity of complying with potentially
22 different city tax regimes would just be another regulatory headache that employers
don’t deserve,” noted Charles Owens,
State Director, National Federation of Independent Business (NFIB). “There is
no way to improve this unfair legislation.”
“To make matters worse, this mandate could easily backfire,”
concluded Bob VanDeventer, President
& CEO of the Saginaw County Chamber of Commerce. “If the state makes it
so difficult for employers to hire city residents, they may look elsewhere for
employees. There are many city residents who are eagerly looking for work and
this legislation throws barriers in front of their opportunities.”
Senate Bill 1127 is now on floor of the Senate and House
Bill 4829 is on the floor of the Michigan House. Either bill could be acted on
in the remaining days of the 2016 legislative session. NFIB and the job
providers represented here are collectively calling on the Michigan Legislature
to reject these bills and focus instead on productive legislation that does not
result in damaging burdens placed on job providers.
You can watch a short video of NFIB comments about the legislation HERE
