April 12 2018 11:45 AM

City missing $7.5 million in revenue from income tax

Harry Gaskin IV was accused last May of failing to file six years’ worth of city of Lansing income tax papers. His total overdue tax bill, according to court records, was $730, plus $145.23 in penalties and another $75.23 in interest. He made one payment of $169.

On April 5, he was arrested after the City Attorney’s Office charged him with six counts of failing to pay income taxes. He was freed on a $200 cash bond.

“The city of Lansing is putting people in jail — trying to put people in jail over past due city taxes,” he said in a voicemail to City Pulse. “It’s ridiculous.”

Lansing Mayor Andy Schor begs to differ with Gaskin. In a column on this page, Schor defends the city’s efforts to collect $7.5 million in overdue taxes owed by Gaskin and others.

“People choose to live or work in the city of Lansing, and we want them to, so we’re going to do everything we can to keep them here,” Schor said. “If you live here, you’re paying 1 percent in income tax. If you work here, you’re paying a half percent. One percent on a $40,000 job is what? It’s $400. Half percent on a $40,000 job is $200. We’re not asking for half your salary. It’s $200 on a $40,000 job towards your eight hours of your day having police protection and fire protection, utilities and services.”

The estimated $7.5 million is enough to pave 16 miles of city roads, Schor said — four years’ worth of what’s assessed though the roads millage.

So the city is getting serious about tracking down folks and prosecuting them. In 2016, city officials filed 1,600 cases for failing to file and another 2,269 cases for failing to pay income taxes, said court administrator Anethia Brewer. An individual could be charged multiple times, she noted. Both charges are criminal misdemeanors.

Last year, there were 117 failure to file income tax return cases filed by the city, but 5,934 cases filed for of failure to pay. City Attorney Jim Smiertka and Schor said the cases filed in 2017 represented just 1,900 individuals.

The enforcement is working, Schor said:

“Since 2016, we have almost 1,600 people who have tax accounts that have been paid in full through our payment plan process.”

The City Treasurer’s Office sends multiple notices to taxpayers seeking settlement before the cases are handed over to the City Attorney’s Office.

Schor said the city’s ready to work with taxpayers.

“If they haven’t been paying, we can offer them a payment plan so that they can slowly pay what they owe,” he said of delinquent taxpayers. “I think we’ve been very reasonable in working with people who haven’t paid, whether they didn’t know or they chose not to.” He said he felt “bad” for those who struggled to decide between paying for groceries and prescription medications and then were faced with a tax bill, but “we have a tremen dous social services program here in Lansing.”

Those who were unaware of the income tax often do not live in the city but work here, Schor said. In those instances, their employers fail to deduct the income tax from their paychecks as they do for state and federal withholdings. But it’s not something the city can force employers to pay.

While some development agreements include provisions to ensure that contractors’ city withholding taxes are paid, Schor said the city would need the state to change the law to allow them to require local businesses to withhold and remit city taxes from paychecks.

“When I was in the Legislature, we tried to run a bill that required business owners to collect income taxes from non-residents,” he said. “Detroit wanted it, and they said it would be able to capture millions of dollars, and that went nowhere fast because the Chamber opposed it, because they didn’t want their members to have to collect that.”