DETROIT — Residents here will have the chance in May to decide whether to raise the city’s sales tax rate, which could provide an economic boost to the city.
The Detroit City Council voted unanimously Tuesday to hold an election about raising the city’s sales tax from the current rate of 7.75% to 8.25%.
The sales tax in Detroit is currently lower than in most surrounding cities, including Paris and Clarksville, where sales tax already is 8.25%, City Secretary Tami Nix said. It wasn’t until recently that Nix realized Detroit’s sales tax was lower than most surrounding communities.
For the city to raise its sales tax, the extra revenue needs to be specifically designated to bolster business in the city, Nix said.
“To raise it, you have to earmark it,” she said. “I think it’s half a percent could go to an economic development committee that is a board — not the city council — that’s elected or appointed. Those people can say, ‘With this half a percent tax, we’ll incentivize businesses to come here.’”
The money also can be used to improve citywide events like the annual Fourth of July parade, which in turn could draw more people to local businesses. Or a quarter of a percent of it can be directed into a streets fund, Nix said.
Raising the sales tax would be a good idea because sales tax revenue will be increasing with the incoming Dollar General, which is expected to be up and running in 2020, and the recently-opened CJ’s Cafe, Mayor Kenny Snodgrass said.
Another reason for the increase is most people who shop in Detroit are not local residents, but are people driving through along Highway 82, Councilor Faye Marshall said.
“We don’t want to tax our people to death here when we can get it from other sources,” Marshall said. “This makes more sense (than raising property taxes).”
The city won’t hold a special election to determine the sales tax issue, but will add it to the ballot during the next council election in May, Nix said.
“It’s going to be up to the community to decide if we want this,” Nix said. “That’s why we need to continue having meetings and hearing from the public — so we can have their input.”