City Tax: A Helping Hand for Local Communities and Taxpayers

Join State Treasurer Rachael Eubanks and her guest, Anne Cram, director of Treasury’s City Income Tax Bureau, for a conversation about how city income taxes work in Michigan.

In this episode, you'll get to know Anne and her path in public service, learn how city income taxes are managed, who they impact, and how they benefit Michigan residents. You'll also learn about Treasury’s role in administering these taxes, common questions from taxpayers, and how this work supports local communities across the state.

RESOURCES

Michigan City Income Tax Webpage

Transcript

Intro:

Welcome to Treasury Talk, a podcast featuring timely tips and information for Michigan taxpayers, hosted by State Treasurer Rachael Eubanks. Listen for takeaways from our subject matter experts that will support you, your family and your business.

Rachael:

Hello to our listeners. I'm Rachael Eubanks, and this is Treasury Talk. Have you ever wondered how your city taxes are managed and where your money goes? Some communities in Michigan administer city income tax. Why does that happen? And how does the state of Michigan factor into the administration of city income taxes? So today we're diving into the heart of city tax administration with Anne Cram, welcome Anne. 

Anne:

Thank you, Treasurer. It's great to be here. 

Rachael:

So, Anne before we get started, we want to talk a little bit about you. So what is your Treasury story? 

Anne:

Well, I'm Anne Cram I currently serve as the director of the city income tax bureau here at Treasury. I've been with Treasury for roughly four years, and my career has taken me through a variety of roles across three different state governments Michigan, Tennessee and Indiana. I've worked in areas like continuous improvement, organizational change, training policy, and even child welfare. Each of these experiences has really shaped how I approach service and problem solving and given me a broad perspective in how to make government work better for the people it serves. What really motivates me is knowing the work we do directly connects to the lives of Michigan residents. Take Detroit, for example. We administer the city income tax through our partnership and with leadership driving economic change, the city has had a reliable and growing revenue stream to fund redevelopment and essential services. That type of change is really exciting when you see new housing projects improve transit services or community enhancements. You know those tax dollars are going to work. And I do follow the city of Detroit on their LinkedIn. So it's really exciting to like and share those experiences. For me, that's incredibly rewarding to see the direct link between the work we do and the real change on the ground. It shows the real, tangible impact that our modernized efforts have on the communities we serve and partner with, city by city. We're helping to strengthen Michigan. 

Rachael:

I love that connection to our vision here at Treasury related to our strategic plan. And your story is a great story. I love hearing about all of the different areas that you've served in, different types of governments, different states, different areas of state, Michigan government, but also the different skill sets that you've generated across time. I mean, you know, coming from something that's really more organizational focused to really running a business area, I think you've got a wonderful perspective for thinking about how we can best serve our customers, in this case, meaning the cities, our twenty four cities that do have an income tax as a potential. So, so a few of our listeners, on that note, if your listeners may know that twenty four cities administer a city income tax, and especially at tax time when you file your federal state, and for some individuals, your city tax return. But not all cities administer a city income tax. So there's a few. Of course, we know our largest city, Detroit, has one city of Lansing, East Lansing Flint, Pontiac a really wide distribution of communities have a city income tax. So can you tell us a little bit about how those city taxes work in Michigan? 

Anne:

Yeah, of course. And like you mentioned, twenty four cities have that city income tax. And each one is unique. When we partner and talk to each city, we go into it with the approach of they have unique needs, they have unique cultures, and we want to learn all about that. State law provides the authority for a city to impose and administer a city income tax, and that tax can be levied on residents, non-residents and businesses. City income taxes are driven by the local units. Elected officials. In a typical situation, a city adopts an ordinance for city income tax. After that adoption, a city wide vote takes place to ensure the residents support the tax. State law outlines city income tax rates, with limits and the requirement for cities to establish procedure for the collection, administration, and enforcement of the tax. Most cities have a city income tax rate for residents that's set at one percent. Well, for non-residents, it's a half percent. Detroit, Grand Rapids and Highland Park do have different rates. State law gives these cities compliance power through enforcement actions, which include penalties for late filings or non-payment of taxes. Ultimately, the revenue received from city income taxes is used to fund important services within the communities like public safety, infrastructure, and community programs. The dollars received through city income tax help balance budgets and ensure financial stability.

Rachael: 

So that's right. Local communities are dependent on revenue for just a really a handful of sources. I mean, aside from property taxes and revenue sharing, the dollars received from city income taxes are the biggest third piece that help fund a community's residents and visitors services that they depend on every single day. So we know this is a local piece, right? It's a local tax. It's enacted locally. It's assessed on those individuals who are local. So why does the state come into play? How does the Michigan Department of Treasury engage with all of this?

Anne:

That's a great question, and one that we get fairly often within the City Income Tax Act, there's a provision that allows cities to enter into an agreement with the Michigan Department of Treasury to administer, enforce and collect city income tax on behalf of the city. A great example would be the city of Detroit. The state of Michigan has been administering the city income taxes for the City of Detroit since twenty fifteen. Treasury handles everything from processing returns to customer service collecting payments. This eases the burden on the city, while also giving residents access to modernized systems and consistent customer service. And looking forward, we'll be starting this work for Flint in twenty twenty seven, which we're really excited about. 

Rachael: 

So it's almost like we're acting as a vendor or a partner to that local unit of government, versus this being an additional responsibility that the state is doing.

Anne:

That's right. These partnerships benefit city taxpayers by allowing them to electronically file their city income tax return, along with their state individual income tax return. The combined electronic filing of city and state returns means taxpayers can electronically file, pay and self-manage their accounts. Refunds can be obtained faster. It's more accurate to electronically file a return. We can provide support with many different communication channels, like messaging us through the computer, calling us or sending us an email. Additionally, city taxes stay local again. There dollars that stay in the cities we partner with and administer for. When a taxpayer within these cities pay their city income taxes, they're really investing into their own neighborhood. 

Rachael: 

I love talking about this wonderful state and local partnership, because it highlights the efficiencies that can be gained, even down to the local level, from some of the technologies, systems and people and investments the state has made over the years to help improve its income tax administration. So the fact that we can extend those benefits to local communities who are administering a city income tax, I am always very excited about it. But then that continues on, right? There's additional benefits that the city receives. Can you elaborate on what those look like?

Anne:

Yeah. So since Treasury began partnering with the city of Detroit to administer its income tax in 2015, the city has experienced a fifty four percent increase in tax revenue. This outcome reflects not only improved administration, but also the city's leadership in driving economic growth, expanding employment opportunities, and restoring financial stability. A great example of a perfect storm coming into Detroit to help improve their revenue picture. 

Rachael: 

So you've got those tailwinds coming from an economic perspective, and also us helping to improve the administration side results in that incredible fifty four percent increase in revenue. So as we just saw there, our city income tax partnerships are really a win win both for residents and for the city governments. So our state mechanisms, we can use those to file and pay returns, which makes it easier for taxpayers and city administrators. So imagine being able to electronically file both your state and city income tax returns at the same time. All tax business can be done in one place at one time. 

Anne:

Absolutely. It really is that one stop shop experience taxpayers want when you can file both your state and city income taxes together. It saves time and cuts down on frustration. Modernization makes the whole process easier, more accurate, and faster. Residents can file online, get their refunds quicker, and reach better customer support when they need it. And for cities, it's a big win too. By letting Treasury handle the administration, they can save on overhead costs. That means more of those tax dollars can go right back into the community instead of covering back office expenses. 

Rachael: 

And that one stop shop is a really important point. You know, you have a taxpayer who's maybe used a software program to file their federal and state taxes, and all of a sudden, you know, they have a moment where they're done and they've got to get out the paper and pencil and calculator and do their city returns on, on paper. So this ability to have everything electronically all done at the same time is a tremendous benefit. So aside from Detroit, which is which was our first step, we shared some exciting news back in June about Flint. Mayor Sheldon Neeley and I signing an agreement to streamline taxpayer service for those who live or work in Flint. 

Anne:

Yes. That's right. So beginning January one, 2027, Treasury will begin processing City of Flint income tax returns for the 2026 tax year. This includes individual, corporate partnership and fiduciary income tax returns. We will also be collecting and enforcing income tax withholding. I want to stress that the city income tax rates will not change, and taxpayers should continue to file and pay with the City of Flint's income tax division until 2027. We will work in partnership with the City of Flint to inform and educate taxpayers about the changes, so stay tuned for more information. 

Rachael: 

So occasionally we do get some questions from taxpayers about our role with city income taxes. So let's do a quick Q&A. This is like a rapid fire session related to city income taxes. Are you ready for a rapid fire session? Let's go for it. All right, let's do it. Question number one do I need to file a city income tax return? 

Anne:

This depends on your residency and where you work. If you work in a city that imposes a income tax or work in one, you may need to file a return check with your local city. 

Rachael: 

And I think we maintain a website that has the list of city income taxes. So if folks just want to know for the first time who's out there that may have the list, I think that exists on our website. 

Anne:

It absolutely does. And a simple Google search will also lead you to our website. Fantastic. 

Rachael: 

Okay. Question number two, will my city income tax rate change if the state processes it? 

Anne:

No. The city income tax rates remain the same even when the state enters into a partnership to administer the city income tax. 

Rachael: 

Question number three, will there be additional cities partnering with the state of Michigan to administer their city tax? 

Anne:

Right now we are processing Detroit city income taxes. Flint begins in 2027. We're in conversations with other cities, and we don't have anything to announce currently, but I hope to in the near future. There is real value of scale when the state and cities partner. There. I'll add that it's a win for both the taxpayers and the city when there is state partnership. 

Rachael: 

Excellent. So question number four. Can I still file my city income tax return on paper if that's how I prefer to do so? 

Anne:

Absolutely. But just a reminder, electronic filing is done by roughly ninety percent of taxpayers, and less mistakes by electronic filing means getting your refund in your pocket quicker. Pro tip don't wait until the last minute. Early filing not only reduces stress, but gives you peace of mind knowing it's done. And if you have questions, reach out. We are here for you. You can reach out to us by phone or by correspondence or email. We're here to help. 

Rachael: 

Question number five are there any additional fees for the state processing my city income taxes? 

Anne:

Generally, there are no additional fees for taxpayers when the state processes city income taxes. 

Rachael: 

Question number six what are the benefits for cities partnering with the state for tax administration? 

Anne:

Cities experienced increased revenue collection, improved tax administration, and enhanced taxpayer services. And on that note, on the enhanced Taxpayer services. I think one of the feedback I tend to get from individuals in the city of Detroit is call wait times. 

Rachael: 

Uh, has that we talked a little bit about the revenue improvement that's come from the city of Detroit. Uh, and when the state began administering its city income tax. But how does the customer service side changed? 

Anne:

Our customer service teams are fantastic. They strive for service excellence. Our average speed to answer goal or wait time goal is four minutes or less. And we track this monthly. This year we have averaged two minutes and twenty five seconds. We also strive to respond to all correspondence within sixty days or less. A responsive and streamlined experience for taxpayers and our city partners is at the foundation of what we do. 

Rachael: 

Outstanding. That does sound like great taxpayer service to me. All right, so here's our last question. Number seven. Looking ahead, what is next for Treasury's role in city tax administration? 

Anne:

We're focused on expanding partnerships with more Michigan cities, continuing to modernize systems and making the process as simple as possible for residents and businesses. Ultimately, our goal is the same. City by city, we're helping build a stronger Michigan. 

Rachael: 

What a wonderful message, and thank you for joining me today to share your Treasury story and to provide a high level overview of the state's City Income Tax Act. I look forward to hearing more about how our partnership helps city and their taxpayers, and it's really a win win for everyone involved. 

Anne:

Thank you, Treasurer Eubanks. We're proud of the work we've done with our current partners in Detroit. Thanks to city leadership and our incredible Treasury staff, we continue to modernize systems, streamline filing and deliver better service for residents. 

Rachael: 

If your city is looking for ways to make tax administration easier, more efficient and more reliable, we'd love to explore partnership with you. Together, we can help your community thrive, just like we're seeing happen in Detroit. And remember, city income taxes play a crucial role in funding the services we rely on every day. Thank you for tuning in to Treasury Talk.