Legislation Authorizing Local "Rain Tax" is Back

Date: June 19, 2019

Local governments would be be allowed to disguise taxes as "fees."

Last session, Senate Bill 756, sponsored by Republican Marty Knollenberg, would have authorized local governments to impose a “rain tax” to fund municipal sewer projects and maintenance without a local vote. The bill was an attempt to get around a Michigan Supreme Court ruling that such “fees” are taxes and require a local vote. The taxes are based on how much rain falls on a property. In cities, where the tax was attempted, bills were sent to small businesses for thousands of dollars. With NFIB opposition, the bill never made it to the governor’s desk and died at the end of session. However, the same concept has found new life in the 2019-2020 session as House Bill 4691, introduced by Republican State Rep Michael Webber. The bill has been referred to the House Regulatory Reform Committee, Chaired by Michael Webber.

The Michigan Supreme Court ruled in 1998 that an attempt by the City of Lansing to impose a stormwater management fee was an unconstitutional tax. In 2013, the Michigan Court of Appeals ruled the City of Jackson’s stormwater “fee” was an illegal tax because a public vote was not taken on the issue and it violated the Headlee Amendment. In the case of the 2011 City of Jackson stormwater tax attempt, one small business owner was assessed $6,700 in the first year. Often, local taxes of this nature are more than what a small business might pay in primary state business taxes such as the Corporate Income Tax or the individual Income Tax – in the case of a non-corporate taxpayer.

Empowering local governments to subvert the constitutional process for raising taxes, by disguising them as fees, undoes the hard work that has been done to improve Michigan’s business climate.

Related Content: Small Business News | Michigan | taxes

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