The City of East Lansing has introduced an income tax for its residents and those who work in the community.  At the same time the city has reduced residential property tax.

How Much is the East Lansing Income Tax?

Those living in East Lansing will pay an income tax of 1% and those working in East Lansing but living outside the city will pay 0.5%.

Retirement income, such as that from social security or 401k plans, is not subject to the tax. Also, those who already pay income tax to another city, such as Lansing, will not pay tax again. Instead, the income tax will be split between the two.

How Does This Affect Property Taxes?

To offset some of the tax burden on East Lansing residents, property taxes will be cut 5 mills, which, city officials say, amounts to about 10% less property taxes on average.

When and How Long is the City Tax Effective?

East Lansing income tax starts at the beginning of next year, on January 1, 2019. As a City Charter amendment, the tax cannot be changed by the city officials alone at any time; any changes to it will require another vote and approval by residents. However, the amendment is time limited to 12 years.

What Does the Tax Fund?

The City of East Lansing plans to use the tax fund for police and fire protection; infrastructure (maintenance and improvement of streets and sidewalks; water and sewer systems; and parks, recreation and City-owned facilities) and supplemental payments for unfunded pension liabilities for retired City employees.

Why is a City Tax Necessary?

City officials explain long-term financial changes have created financial planning challenges, particularly where city employee pension plans are concerned. Though the number of city employees has fallen roughly 30% since 2001, the number of pensioners has increased as more employees have retired. Lower market returns on pension investment plans, approximately $1.5 million less state allocated sales tax revenue since 2001, a lack of tax revenue from tax-exempt Michigan State University, and a drop in property values after the 2009 recession, have created the city’s present financial situation.

By law, all city employee pension plans must be funded, and not providing additional funds would require city officials to make up the difference from other city services. The 2019 and 2020 budget outlines showed that without additional funds the city would need to cut police, fire, and Emergency Medical staff, as well as closing the East Lansing Aquatic Center and Hannah Community Center.  With the income tax approved, the more drastic cuts will likely not be necessary and East Lansing residents will continue to enjoy quality public safety, infrastructure and amenities that help to makes East Lansing one of the best places to live in America.