Re-route revenue sharing to localities

The Detroit News is highlighting ideas from various groups to promote discussion on reform, restructuring government and the economy.

Re-route revenue sharing to localities

Idea 10: Eliminate local government revenue sharing not mandated by the state Constitution.

Why: Revenue sharing allows communities to provide local residents with more services while appearing to pass the costs on to everyone else in the state. This encourages the expansion of nonessential programs. If local government services were instead funded entirely by local taxes, it would limit both the demands of residents and the empire-building tendencies of municipal officials. Revenue sharing also reduces competition between communities, which would otherwise encourage greater government efficiency.

Benefit: Using the current allocation formula, next year the state would distribute to local governments $388 million more than is required. This money could be returned to taxpayers.

How: Eliminate statutory revenue-sharing payments and return the $388 million to taxpayers as a refund of about 20 percent of their payments of the 6-mill state education tax. ($388 million is approximately 20 percent of the revenue raised by that tax.) The refund could be distributed in the same manner as Headlee excess-revenue refunds. Local governments could replace their lost revenue by clawing back some or all of that tax cut by raising their own property taxes. Or they could decide to do without.

Obstacles: Local governments like spending tax dollars levied by the state, and they use tax dollars funneled through the Michigan Municipal League, the Michigan Townships Association and the Michigan Association of Counties to lobby for higher taxes and spending. Local officials are savvy political actors, as well as the most likely source of a serious electoral challenge to incumbent legislators.

Source: Mackinac Center for Public Policy