Plenty of Michigan cities have city income taxes
http://www.michigan.gov/taxes/0,4676,7-238-43715-153955--F,0...
One addition and this comes from a fifth generation Detroiter living outstate who visits often. There are lots of young urban homesteaders moving downtown especially in neighborhoods like Corktown and they've given the city a huge boost. However what happens when they marry and have children?
There better be another group of young people willing to buy their houses because no sane couple will put their children in the Detroit schools. If they fail to fix the schools the boomlet will crash.
But personally I am bullishly optimistic on the city. Detroit has big problems but it also has grand canyon sized opportunities that exist nowhere else.