Why Doesn't Detroit Levy a Local Sales Tax?

[313WX]

I just found a link showing some interesting data.

http://taxfoundation.org/article/sal...ajor-us-cities

Apparently, Detroit's one of only a few major cities that doesn't levy a local sales tax.

This seems like a no-brainer IMO, given all the untaxed drug money circulating around the city and all of the untaxed money spent by suburbanites during major events/sports games.

I don't see what would be the problem with levying a 2% or 3% sales tax [[in addition to the 6% state sales tax). Most folks wouldn't even notice it when they purchase stuff. I mean, the city right now can use any additional revenue it can get. This can be applied to all city-owned property, and not just limit it to the city proper [[for example, the Detroit Zoo which is technically outside of the city).

[Hypestyles]

rightly or wrongly, it would be perceived as a tax on the city's minority population[[s). Both Napoleon and Duggan position themselves as non-bourgoise populists, so I doubt they'll bring up the idea, even if they've privately considered it.

[313WX]

rightly or wrongly, it would be perceived as a tax on the city's minority population[[s). Both Napoleon and Duggan position themselves as non-bourgoise populists, so I doubt they'll bring up the idea, even if they've privately considered it.

It probably wouldn't be politically possible.

This is something that would also have to be approved by the state of Michigan as well. Majority of the state legislature is going to view something like this as another way for Detroit to steal or leech more of their constituents' money, and good luck convincing them otherwise.

Does anyone happen to have an estimated amount of how much money is spent by "tourists" in Detroit per year?

[Chinman]

actually Detroit has a City Tax and so does Pontiac. too say say that they do not have a LOCAL tax is soo wrong. If I would live in Roseville...I Would not have a TAX.

[RO_Resident]

The short answer--legislature has been reluctant to take up local options for taxes.

[professorscott]

The short answer--legislature has been reluctant to take up local options for taxes.

I've had to look into this in detail for some particular research I've been doing. It's probably even worse than you all seem to think. There is a great body of legal opinion out there that the Michigan Constitution does not allow for local sales taxes. It's not precisely set forth, and you could argue that it isn't so; but with quite a lot of legal eagles believing that it is so, any attempt to provide a local sales tax, short of amending the Constitution, would run into legal battles.

So to get this done would require a constitutional amendment. That's not impossible, but it will be quite time consuming. And if it only applies to Detroit, it will further chase away business.

[313WX]

actually Detroit has a City Tax and so does Pontiac. too say say that they do not have a LOCAL tax is soo wrong. If I would live in Roseville...I Would not have a TAX.

I know Detroit has a city INCOME tax.

I'm referring to a city SALES tax, something Detroit doesn't have.

[313WX]

And if it only applies to Detroit, it will further chase away business.

I'm not exactly sure how it would further chase business away directly.

A Sales Tax is typically included [[hidden) in the total cost of goods. And it's the customer who typically pays the Sales Tax, not the business owner. At worst, it may lead to some additional paperwork for business owners [[which I don't see why that would be a big deal if most places have automated their accounting processes these days).

And I see no reason why it can't be something other cities across the state can levy as well.

[professorscott]

I'm not exactly sure how it would further chase business away directly.

A Sales Tax is typically included [[hidden) in the total cost of goods. And it's the customer who typically pays the Sales Tax, not the business owner. At worst, it may lead to some additional paperwork for business owners [[which I don't see why that would be a big deal if most places have automated their accounting processes these days).

And I see no reason why it can't be something other cities across the state can levy as well.

It is not hidden; it's right there on the receipt for customers to see. It is well known in other parts of the country and the world where one municipality has a higher sales tax than the next, retail businesses tend to concentrate on the lower taxed place over the higher. It's not as prevalent for low-ticket merchandise; if I buy a greeting card for $5.00, I don't much care whether I pay $0.20 tax or $0.35 cents. But if I'm buying furniture, expensive clothing or automobiles, it might make a big difference.

It is the consumer preference to get a bargain that forces businesses to locate in lower-sales-tax areas when they are available very nearby.

If a sales tax were levied regionally, that changes things. I might well drive from Detroit to Ferndale or Allen Park to save seven dollars tax on an item; I'm less likely to drive to Flint or Monroe.

[corktownyuppie]

It is not hidden; it's right there on the receipt for customers to see. It is well known in other parts of the country and the world where one municipality has a higher sales tax than the next, retail businesses tend to concentrate on the lower taxed place over the higher. It's not as prevalent for low-ticket merchandise; if I buy a greeting card for $5.00, I don't much care whether I pay $0.20 tax or $0.35 cents. But if I'm buying furniture, expensive clothing or automobiles, it might make a big difference.

It is the consumer preference to get a bargain that forces businesses to locate in lower-sales-tax areas when they are available very nearby.

If a sales tax were levied regionally, that changes things. I might well drive from Detroit to Ferndale or Allen Park to save seven dollars tax on an item; I'm less likely to drive to Flint or Monroe.

While a sales tax might be seen as reliable way to generate revenue from tourism, there are several problems.

- A sales tax is regressive and disproportionately affects our poor. Why? A local sales tax might pinch the pocketbooks of those people who spend their extra income on a ballgame coming in from the suburbs, but it will effect me, my neighbors, and every Detroiter on every purchase from groceries to gasoline.

- Detroit retailers already have a difficult time with city residents fleeing to the suburbs for better goods and services. The sales tax would only make a severely bad problem only worse.

But the idea of having surrounding areas pick up their fair share of social services, the homeless, the mentally ill is find by me and I'm in support of finding ways to do it. I don't think a sales tax would be effective in that.

What would, IMHO, be effective would be to regionalize services so that we would have a greater pool of resources working toward the problem. But, of course, there are two hurdles: [[1) selling the region on picking up some of the tab, [[2) selling Detroit politicians on giving up majority control over the contracts.

We are making progress on both fronts, but far and away it's the Detroit politicians who are harder to get buy-in from.

[aj3647]

You might not notice an extra 2-3% on a small purchase, but what about something big? What about a car? On a $20,000 vehicle, that could mean an extra $600. Why buy at a dealership in Detroit when you can drive 10 miles to the burbs and save HUNDREDS? And that applies to any big ticket item that costs hundreds or thousands of dollars.

And as already mentioned, sales taxes are inherently regressive. They disproportionately impact the poor.

[Gistok]

I don't see what would be the problem with levying a 2% or 3% sales tax [[in addition to the 6% state sales tax). Most folks wouldn't even notice it when they purchase stuff. I mean, the city right now can use any additional revenue it can get. This can be applied to all city-owned property, and not just limit it to the city proper [[for example, the Detroit Zoo which is technically outside of the city).

You have got to be kidding...

On top of 2.5 percent resident income tax... a 5 percent utility tax for gas, electric and phone service... and probably the highest property tax rate in the state... ???

Well you are right about one thing... most people won't notice it...because those that can afford to live elsewhere for more services [[for their money) continue to empty out the city at a much faster clip than downtown and midtown are repopulating it...

I moved out 22 years ago because the income tax alone would pay for a very nice 2 week vacation each year.

If the city wants to gain population, they need to LOWER their taxes... not raise them.

And also... Detroit CANNOT apply taxes to property they own outside of their jurisdiction. The Zoo is NOT in Detroit...but in Royal Oak. Where did you get the unheard of notion that any government entity can apply taxes outside of their jurisdiction??

[wolverine]

You might not notice an extra 2-3% on a small purchase, but what about something big? What about a car? On a $20,000 vehicle, that could mean an extra $600. Why buy at a dealership in Detroit when you can drive 10 miles to the burbs and save HUNDREDS? And that applies to any big ticket item that costs hundreds or thousands of dollars.

What you are suggesting cannot be done. Like most cities with a local sales tax, you will be receiving your tax bill in the mail if you attempt avoid the additional city taxes not added at the suburban dealership. I'm sure there's some illegal, crafty ways to save "hundreds" but it usually ends up with someone getting busted. There's so much paperwork involved when buying from a dealership.

Things you will save money on are expensive electronics and pricier clothing. A half percent might keep people in town but above that they'll drive to the next town because the gas is nothing. For the big US cities, most folks will deal with higher taxes out of convenience of shopping locally.

Personally I don't see Detroit benefitting much from such a policy, regardless of the fact that this would hurt the poor. I mean, where are they trying to squeeze that extra cash from? Detroit doesn't have the commercial intensity that would generate enough revenue to be much of a benefit. It would just encourage Detroiters that shop in the suburbs to buy more stuff out there vs the city. Same with a county tax.

Anyways I don't see the state allowing local taxes any time soon.

[wolverine]

Where did you get the unheard of notion that any government entity can apply taxes outside of their jurisdiction??

Haha, just imagine if cities could annex simply by buying the neighboring community

[Hermod]

What you are suggesting cannot be done. Like most cities with a local sales tax, you will be receiving your tax bill in the mail if you attempt avoid the additional city taxes not added at the suburban dealership. I'm sure there's some illegal, crafty ways to save "hundreds" but it usually ends up with someone getting busted. There's so much paperwork involved when buying from a dealership.

South Florida has a plethora of multimillion dollar yachts which are docked here while the owners use them for Caribbean cruises and for charter. These yachts are all registered in foreign countries and fly the flags of various Caribbean countries or the Marshall Islands [[in the Pacific). The only stricture is that the yacht has to leave US waters at least two weeks a year [[big deal). If the yacht is sold, the transaction must take place outside the US.

A freind was a captain on a yacht that was being sold. I helped him take it to the Bahamas. The buyer,his friend, his broker, and a guy from a bank flew out to meet us. A Bahamanian lawyer met them at the airport and drove them to the marina. They did the transaction [[the captain had POA from the owners) and took over the yacht. The lawyer drove the bank guy, the captain, and myself back to the airport and we flew back to Florida. The buyer, friend, and broker took the yacht back to Florida. Florida was out $12,000 in sales taxes.

[MikeyinBrooklyn]

I do strongly favor sales taxes over income or property taxes, so I could see myself supporting a sales tax to replace one of them. But there is definitely a consequence for retail sales. Buying a lot? You'd save enough to warrant shopping in the burbs.

I think Detroit should concentrate on lowering spending, not on raising revenue. It's absurd that a city government that does barely more than diddly squat is actually very expensive to maintain.

[DetroitPlanner]

The short answer--legislature has been reluctant to take up local options for taxes.

Exactly. Michigan legislature has forbid local sales taxes in lieu of revenue sharing. Bottom line is that you will need to get the State to permit this. With the number of Tea Partiers in both the house and senate, this is very unlikely.

[iheartthed]

You have got to be kidding...

On top of 2.5 percent resident income tax... a 5 percent utility tax for gas, electric and phone service... and probably the highest property tax rate in the state... ???

Well you are right about one thing... most people won't notice it...because those that can afford to live elsewhere for more services [[for their money) continue to empty out the city at a much faster clip than downtown and midtown are repopulating it...

I moved out 22 years ago because the income tax alone would pay for a very nice 2 week vacation each year.

If the city wants to gain population, they need to LOWER their taxes... not raise them.

And also... Detroit CANNOT apply taxes to property they own outside of their jurisdiction. The Zoo is NOT in Detroit...but in Royal Oak. Where did you get the unheard of notion that any government entity can apply taxes outside of their jurisdiction??

.....they could implement a sales tax to relieve pressure on property taxes and income taxes......

[Scottathew]

I'm not exactly sure how it would further chase business away directly.

It would chase customers away directly. That has a huge impact on business.

[BankruptcyGuy]

The best example is in Chicago, where the city has a 9.25% sales tax, which is actually down from 10.5%. They have not received the big uptick in revenue, because big-ticket items [[appliances and cars are the largest) were simply being made in the suburbs. Chicago tried to force other jurisdictions to collect the tax to remit to Chicago, but the suburbs wouldn't play along [[sound familiar?). So Chicago now passed a use tax, and city residents are asked to fill out a tax form for all the property purchased outside the city. You can take a guess as to how well that works.

[iheartthed]

The best example is in Chicago, where the city has a 9.25% sales tax, which is actually down from 10.5%. They have not received the big uptick in revenue, because big-ticket items [[appliances and cars are the largest) were simply being made in the suburbs. Chicago tried to force other jurisdictions to collect the tax to remit to Chicago, but the suburbs wouldn't play along [[sound familiar?). So Chicago now passed a use tax, and city residents are asked to fill out a tax form for all the property purchased outside the city. You can take a guess as to how well that works.

Yes, but there are some goods and services that you can levy a sales tax against which cannot be skirted. For instance, if Detroit were able to levy its own local sales tax then it could collect sales tax revenue on alcoholic beverage sales, restaurant meals, hotel rooms, gasoline sales, etc. This potential revenue stream is off limits to the city now, so they have to lean on revenue streams from property taxes and income taxes.

[DetroitPlanner]

Yes, but there are some goods and services that you can levy a sales tax against which cannot be skirted. For instance, if Detroit were able to levy its own local sales tax then it could collect sales tax revenue on alcoholic beverage sales, restaurant meals, hotel rooms, gasoline sales, etc. This potential revenue stream is off limits to the city now, so they have to lean on revenue streams from property taxes and income taxes.

Do you realize there are already extra taxes on specific bond issues that benefit Detroit paid that are paid each time you rent a hotel room or a car in the tri-county? These dollars go to support Cobo, and the Stadiums which help to generate a lot of economic development downtown. How much do you want to tack onto a service?

[iheartthed]

Do you realize there are already extra taxes on specific bond issues that benefit Detroit paid that are paid each time you rent a hotel room or a car in the tri-county? These dollars go to support Cobo, and the Stadiums which help to generate a lot of economic development downtown. How much do you want to tack onto a service?

I do realize that. I do not know how it is relevant to a discussion about Detroit being able to levy a sales tax.

[DetroitPlanner]

I do realize that. I do not know how it is relevant to a discussion about Detroit being able to levy a sales tax.

It is relevant if you want to keep the bars and hotels full of conventioneers and those who are attending events. Besides the state will not allow a local tax. How these got through though may be able to answer some questions about who, why, or how.

[iheartthed]

It is relevant if you want to keep the bars and hotels full of conventioneers and those who are attending events. Besides the state will not allow a local tax. How these got through though may be able to answer some questions about who, why, or how.

It will have virtually no effect on bars and hotels. Non issue.

But it could be used to lower the property tax burden for Detroit home owners.