Gas Over $5, Inflation Rate at 8.6%, Ludington Council Set to Hike Taxes

Inflation has been above 5 percent over the past twelve months. There are people raising families in Ludington who have never experienced this kind of inflation. The average Ludington household spent an estimated $4000 more last year as a result of inflation.  Price hikes have outpaced wage gains and left Ludingtonians struggling to make ends meet.

The Biden Administration has indicated their cure for rising inflation is to raise taxes, especially on corporations.  No cogent argument has been made for this scheme, which fails to see that GDP has remained almost stagnant over the last two years, but the money supply has increased by 40%-- which leads to inflation since you have few goods being chased by a lot of dollars.  

The solution seems obvious but is unlikely to happen with this administration, which will likely adopt policies that go the opposite way:  the Fed has to slow down the printing of money, businesses need to produce more products.  Corporate taxes will increase the price of producing each unit of the good or service, which will be passed on to consumers as higher prices.  The current mindset will likely exacerbate the problem further by offering stimulus that will require a raise in money supply.

Now let's look at the current problem in a much smaller scale of government, where decisions affect less than 8000 people rather than 333,000,000:  the corporate City of Ludington.  Tonight, the Ludington City Council will have a first reading of six ordinances that have traditionally been marched out over the summers of the last 15 years or so.   These levy and set the millage rates of the DDA fund, the police pension fund, and the operating (including refuse) fund.  This has never been a mandatory practice, in fact its sole purpose is to hike taxes above the rates fixed by the Michigan Constitution in a scheme called truth in taxation.

A brief aside about Michigan's Headlee Amendment.  Passed in 1978, it affected state and local taxes in Michigan, the relevant part was written into the state Constiution as Article IX, Section 31, which:  1) Required voter approval for any local tax increases or new taxes established after Headlee was approved, 2) Limited property tax revenue resulting from property tax assessment increasing, 3) Limited revenue collected to the amount the millage originally was to generate (with factor for inflation).

The property tax revenue limitation requires that if the assessed value of a local tax unit’s total taxable property increases by more than the inflation rate, the maximum property tax millage must be reduced so that the local unit’s total taxable property yields the same gross revenue, adjusted for inflation.  

Headlee protected property owners from increases in taxes by rolling back the tax rate, thus in a period with no inflation, if a tax base for a local unit increased from $1 billion to $1.1 billion and the tax rate was 50 mill, the millage would have to be reduced from 50 mills to 45.45 mills, so that total revenue would be the same as originally generated. This is known as a Headlee rollback.

When rollbacks occur, the local units revenues from property taxes still goes up by the inflation rate from the prior year, so in our example, if there was inflation, the rate would be adjusted upwards to recoup that amount.  In 1982, the legislature passed something called the Truth in Taxation Act which allowed a local unit to hold a public hearing in order to limit rollbacks when they occurred. 

Due to a lot of property sales at increased prices uncapping the taxable values of property, the operations/refuse millage would roll back from 14.312 to 13.662 and the DDA millage would roll back from 1.6057 to 1.5231 if city hall held no truth in taxation hearings, and both millage rates would still recover their value plus the rate of inflation for 2023, what looks to be a big raise.  With the hearings and passage of the amended rates, the new millage rates would be 14.1344 and 1.5734.  The rate decrease would be about 1/3 of the decrease without the hearing and (using their figures) city hall would be about $136,000 wealthier, that money coming from already-struggling property owners

So city hall will not only keep up with inflation, they will get a $146K bonus from taxpayers, because they think they can spend your money better than you can, and that higher rate will continue into future years sapping the taxpayers further.  These figures above are from p.146+ of the June 13 LCC packet which also has a memorandum telling the public that there is no alternative to holding this truth in taxation hearing and overburdening the public who are just trying to make ends meet when their food and energy prices are experiencing double digit inflation.

As citizens on fixed incomes, citizens working at jobs where pay raises are getting outdistanced by volatile prices at the store and pump, and entrepreneurs looking to relocate their business to Ludington hope for some sympathy from local governments and keep tax rates low, city administrators are telling us they must have a tax hike, because they have almost spent their $850,000 in ARPA stimulus funds and they need $1.128 million to put two new bathhouses in Cartier Park (see p. 174).  

The Ludington City Council is about to embark on a journey not much unlike the fool's trip the Biden Administration is engaged in, raising taxes in the hopes of gaining prosperity and reducing inflation.  They will fail just as badly.  Please go to the meeting on June 27 to voice your disapproval of the tax hike, and make it even clearer by going tonight and telling councilors how difficult it is in today's world without another cutpurse nipping at your empty bank accounts.

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Excellent article X. I guess there's not much difference between the fools who run Washington and the fools who run Ludington. Where is the common sense. The City managed to squander 850,000 ARPA dollars. Now they want to provide tourists with new facilities to make them feel more at home while they relieve and cleanse themselves. What a plan. God forbid that the hard working citizens should get a tax break. Makes sense. Since we're going down the toilet anyway it might as well be a brand new shiny one.

Our city is spending, and will be spending, a lot on public bathroom facilities.  The redo at the end of Loomis Street cost nearly a half a million, the redo in Copeyon will likely be more since it was scheduled to cost $400K a couple years ago.  The bathroom/concession building was a large part of the $2.4 million Legacy Park project, and now the Copeyon project looks as if it will go ahead at a cost of $1.128 million and climbing daily.  If they are doing all this optional renovation in such a short time, they obviously have plenty of money and/or access to grants.  So why go through the aggressive raising of taxes to nullify most of the Headlee Rollback?

What really frosts me after last night's meeting is that they offer no alternative to this tax hike, while admitting that the state and MEDC should have a lot of federal stimulus funds available still and that they have a good shot at that free money.  And yet, no official last night had any regret or any inkling of accepting the unwritten alternative of saying no to draining the wallets further of their constituents.  Not surprisingly, they showed an interest in trying to take your second amendment rights away. 

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