Last year's failed attempt by legislators to pass a "rain tax" to fund municipal sewer projects and maintenance without a local vote is being resurrected again this year.
Last year’s failed attempt by legislators to pass a “rain tax” to fund municipal sewer projects and maintenance without a local vote is being resurrected again this year. Last year, it was a senate bill sponsored by Republican Marty Knollenberg that never made it to the governor’s desk and died at the end of session thanks in part to NFIB opposition. This session, the attempt to pass the “rain tax” comes in the form of House Bill 4691, introduced by Republican State Rep. Michael Webber.
On October 29th, the House Regulatory Reform Committee held a hearing on the bill. NFIB State Director Charlie Owens testified alongside the Grand Rapids Chamber and the Michigan Realtors Association in opposition to the bill. Video of their testimony can be viewed HERE and begins at the 1:17:30 mark.
This bill is bad legislation because it goes against past court rulings which found the various local “fees” are really local taxes imposed without a vote of the citizens within the taxing jurisdiction and a violation of the Headlee Amendment. In 1978, Michigan voters passed that amendment to the state constitution, which requires voter approval for any local tax increases or new taxes.
In 1998, the Michigan Supreme Court ruled that an attempt by the City of Lansing to impose a storm water management fee based on how much rain falls on a property, was an unconstitutional tax. In 2013, the Michigan Court of Appeals ruled the City of Jackson’s similar attempt to impose a storm water “fee” was also an illegal tax because the public didn’t have the chance to vote on the issue and it violated the Headlee Amendment.
In cities where the tax was implemented, small businesses received bills for thousands of dollars. Before the tax was repealed by the Supreme Court, one small business owner in Jackson was assessed and ordered to pay $6,700 the first year.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.
Letting local governments go around the constitutional process to disguise taxes as fees is dangerous because it undoes the hard work by our previous governor and the legislature to improve Michigan’s business climate. If this bill passes, companies considering expanding or locating to Michigan will be discouraged by this kind of local conduct and companies already in Michigan will avoid those localities.
NFIB will continue to fight against attempts to disguise taxes as fees.
