Port Huron Charter Commission Reforms Could Also Deliver Economic Stimulus.  

  Michigan has long been known as a donor state when it comes to taxes paid to the beauracrats in Washington DC versus the amount of our tax dollars that are returned to the state through Federal grants, Federal jobs and Federal spending. From 1981 to 2005 that added up to a lose of $196,615,000,000 or almost 200 Billion dollars from the Michigan economy according to http://www.scribd.com/doc/8229012/Tax-Donor-or-Contrib-States.  With our economic slide the last few years that has reversed and Michigan currently receives more back then we send in.

 While we as a state can not control how much of our tax dollars comes back to Michigan we do have some control over how much we send. Smarter tax policies are the key to keeping more of Michigan ’s money in Michigan generating jobs in Michigan . Our tax polices at the State, County, Local and School levels need to be administered so that what ever amount we agree to pay to State tax collectors we can minimize the amount we send to DC.    

 The Port Huron Charter Commission is in a position to get this much needed change in how Michigan does business started. To do this I strongly recommend that section 73 Taxes Due be changed so that it benefits our local economy and residents more and the Federal government less. Changing a few additional words in our charter will allow city property tax payers to save on their federal taxes and keep that money in our local economy creating local jobs. If the rest of Michigan follow’s Port Huron’s lead on this as they have on the March of Dimes Jail and Bail Michigan will be able to keep 10’s if not 100’s of millions of dollars a year in our State economy.   

Taxes, When Due

Section 73. City taxes shall be due and payable on the first day of July of each year. Taxes shall be collected without additional charge for a period of one (1) month from the date the tax bills are mailed. An addition of one per cent (1%) of every unpaid tax shall be made on the first day of the second, third, fourth and fifth thirty (30) day period (four percent [4%] maximum) next following the mailing of the tax bills and the amount of tax and of such additions as are hereinbefore specified shall henceforth be the unpaid tax.  

A simple change in the first sentence so that it reads:

 Taxes, When Due

Section 73. City taxes shall be due and payable on the 5^th day of December of each fiscal year. Taxes shall be collected without additional charge for a period of one (1) month from the date the tax bills are mailed. An addition of one per cent (1%) of every unpaid tax shall be made on the first day of the second, third, fourth and fifth thirty (30) day period (four percent [4%] maximum) next following the mailing of the tax bills and the amount of tax and of such additions as are hereinbefore specified shall henceforth be the unpaid taxes.

 This change will switch some of the summer property taxes you pay to the winter tax bill. The total taxes you pay in each of the city’s fiscal years would still be the same.

   The benefit is that switching the largest property tax bill to be due in December residents of Port Huron will have the option of paying their largest property tax bill before the 45 days grace period expires in January so that tax payments can be itemized in the calendar year just ending. By paying 3 property tax bills in one year and only 1 the next year people will have a larger itemized deduction the one year and a smaller amount to itemize the next on their Federal Income tax returns. 

 This creates a bigger refund the first year and for some it will make using the standard deduction the next year a better option.  For those where using the standard deduction the 2nd year makes sense they will have a larger combined deduction for the two years. This will keep more money in the local economy. If the School districts and or County joins in changing when the taxes they collect are due this will make the benefit of itemizing your taxes every other year and taking the standard deduction the other years even larger.

 To increase the benefit of doing the above I am hoping Banks and Credit Unions will also allow their mortgage customers to pay next years interest all in December and then have their monthly payments reduced that next year by the interest amount they paid in advance. This would allow people to increase their itemized deductions the same year they pay the February property taxes 45 days early and would also increase the benefit of using the standard deduction the next year. Citizens First or other institutions would benefit by getting the cash earlier. If local financial institutions are the first to offer this product they will certainly gain market share.  

 An example of how this would work is:

 Currently a resident may have: 

 $2,700 in summer property taxes and $800 in winter property taxes for a total of $3,500 to itemize on their federal return. 

 $6,000 in mortgage interest to deduct.

 Total itemized from these 2 items = $9,500 each year for a 2 year total of $19,000

 Proposed change allows a resident to:

 Year 1:   $2,700 in winter property taxes and $800 in summer property taxes and paying the next winter tax bill of $2, 700 a few days early for a total of $6,200 to itemize on their federal return. 

 $6,000 in mortgage interest to deduct. Plus next years interest of $6,000.

 Year 1 total itemized from these 2 items = $18,200

Year 2 total itemized from these 2 items =  $800.  Use standard deduction of $10,600 

 2 year total of $28,800 in deductions. An increase of $9,800 over current.

 A typical tax bracket is 15% so this saves the customer $1,470 in Federal taxes and keeps that money in the local economy. It costs the customer up to 45 days interest on the $2,700 in property taxes they paid early which is about $14 if they had it in a 4% CD and interest on the $6,000 in mortgage interest they paid early which is about $130 in a 4% CD.   A net gain of  $1,326 for that family.

 Some questions have been raised so I have provided some of those questions with my answer below.

 Thank you for taking the time to read this. 

 Mark Byrne

Port Huron City Councilman and Libertarian Party Chair for St Clair and Sanilac Counties .

 Question.  Can the city determine when these other municipalities will collect their tax?

No the City can not determine when the other tax authorities taxes are due.  The city changing our due date would be the first step. My goal is to make Michigan 's entire tax system work smarter no matter what size tax we have. I hope to set an example in Port Huron and then take my case to the county, school board SC4 and State reps.  I figure changing ours will still have a benefit and would help get the attention of the county etc...

Would the tax due on July 1, 2010, be moved forward to December 5, 2010? If so which year’s assessment would be used?

 Yes your taxes would be due later not sooner. It would be the same assessment used for either the July 1st due date or the December due date.  This actual allows more time for assessment appeals to be heard and processed before the actual bills go out.  This would all still be in the cities same fiscal year. 

If the tax due on July 1, 2010 is pushed back to December 5, 2011, would it cause cash flow problems for the entities collecting the tax?

It certainly will affect cash flow. Not all communities will be able to this.  Port Huron is currently in a good cash flow position and this would help separate us from the crowd in a good way for a change when it comes to taxes.  For communities with adequate cash on hand this in the long run will only cost them the 5 months interest they would have earned on that money. In the long run it will increase cash flows by creating more jobs and higher property values several ways.  First, there will be a 1 time stimulus as property tax payers will have an additional 5 months to pay  their property taxes. If you use an escrow account you may get a check from your bank for having too much in your escrow account. Secondly, the additional money kept in the community instead of going to  Washington DC each year will be added to the local economy creating additional local jobs possible fixing up their house or adding on. Third the improvement in Port Huron 's position in how much total taxes you pay for choosing Port Huron will improve thus making Port Huron housing market less depressed. Our home prices have historically been depressed compared to the surrounding communities due to the higher tax climate in Port Huron .        

How much does Michigan send in income taxes to Washington DC ? 

In 2007 Michigan sent the 13^th most.

                            Total            Population   per/person

If making our tax system smarter and our banks and credit unions offer a the new product and that reduces federal income taxes by just 1% per person that will be the same as getting an additional check for $699 million from the federal government every year. My family would personally save over 10% in what we send to Washingon DC if all these changes are made. A statewide 10% savings would be a yearly $7 billion dollar check for Michigan from Washington DC .

Does anyone believe Michigan ’s economy couldn’t use this economic boost ?  If it’s true that money spent locally circulates in the economy 7 times as some suggest Michigan can not afford to wait on having smarter tax policies. The Port Huron Charter Commission is in the position to get the momentum going on this. It is time once again for Port Huron to tap into it’s innovative tradition and lead the county and state towards smart tax policies. 

What can I do to Help ?        

Contact the members of the Charter Commission, attend their meetings and public hearings. Insist they make this simple but very significant change to section 73. Address their concern that making too many changes might lead to the revised charter being rejected by the voters. You can do this by letting them know you will not vote for the revised charter if this change is not included.