Clarke's plan for tax-free Detroit is good start

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Newt Gingrich brought the formula for fixing Detroit to Mackinac Island last year when he told the Detroit Regional Chamber's policy conference that making the entire city a tax-free zone would spur investment and job creation and attract residents. Now, Rep. Hansen Clarke hopes to convince Congress to go along.
The freshman Detroit Democrat has fashioned a version of the former House speaker's idea into a bill that he's introduced in the House to reinvest every federal tax dollar collected in the city to its rebuilding.

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From The Detroit News: http://detnews.com/article/20110922/...#ixzz1YgKrVMs9

I kinda like it. I'd much rather the $15-$20k I pay in federal taxes come right back to the city. That's 10-15x how much I'm paying city taxes. Could you imagine what this would do with the city budget? Plus you'd be reducing the property taxes and eliminating the income tax?!

What do we need to do to get this some political traction??

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Originally Posted by corktownyuppie

From The Detroit News: http://detnews.com/article/20110922/...#ixzz1YgKrVMs9

I kinda like it. I'd much rather the $15-$20k I pay in federal taxes come right back to the city. That's 10-15x how much I'm paying city taxes. Could you imagine what this would do with the city budget? Plus you'd be reducing the property taxes and eliminating the income tax?!

What do we need to do to get this some political traction??

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Flying pigs and monkeys, and a way to freeze hell.


Not in this political climate...

so Hansen Clarke is saying that if you LOWER TAXES, that will increase investment and job creation?

thats so conservative of him......

BAD IDEAL! A tax free Detroit means resource problems its city services and the State of Michigan.

I think we should all start laughing at this proposal. Convince the rest of the US that it is the funniest joke in the world. When they become intoxicated with the thought,have a couple of agents slip into the treasury, print off a few zillion dollars and deposit them into the city's coffers. Problem solved!

Ha ha ha !!!!!

Nah, I don't think so.

There are so many things working against Detroit, for example. Detroit charges a tax on all utilities, suburbs do not, it charges income tax again, others do not. So if you want it to be a business friendly city, you have to remove the road blocks that stop some, if not most businesses from coming to the D. This is just my opinion.
I am sure there are others, but if I were a business looking for a place to do business, I am sorry but it would not be in the city itself. Its business 101, keep your overhead low to increase your bottom line.

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Originally Posted by corktownyuppie

From The Detroit News: http://detnews.com/article/20110922/...#ixzz1YgKrVMs9

I kinda like it. I'd much rather the $15-$20k I pay in federal taxes come right back to the city. That's 10-15x how much I'm paying city taxes. Could you imagine what this would do with the city budget? Plus you'd be reducing the property taxes and eliminating the income tax?!

What do we need to do to get this some political traction??

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Is there something missing to this article? What's in it for the Federal Gov't to forgoe $2 billion in federal tax revenue? Is there $2B in services the Federal Gov't will stop spending in the area to offset the $2B in lost tax revenue? Normally, there's strings attached to make up for the shortfall in lost revenue.

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Originally Posted by davewindsor

Is there something missing to this article? What's in it for the Federal Gov't to forgoe $2 billion in federal tax revenue? Is there $2B in services the Federal Gov't will stop spending in the area to offset the $2B in lost tax revenue? Normally, there's strings attached to make up for the shortfall in lost revenue.

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What makes you assume that we get $1 in services for every $1 in taxes? We don't.... Michigan is a donor state.... in that sense we're more like Alberta.

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Originally Posted by Gistok

What makes you assume that we get $1 in services for every $1 in taxes? We don't.... Michigan is a donor state.... in that sense we're more like Alberta.

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Do you have a breakdown? How much does the Federal Gov't spend on subsidizing Section 8 low income housing in Detroit? How much do they spend on guaranteeing mortgages? How much do they spend on the Dept. of Homeland Security in Detroit? What else does the Federal Gov't subsidize in the city? Do these costs all get downloaded to the city in return for forgoing Federal Tax revenue? And after that, what's the real savings? Why would the Fed. Gov't just forgoe $2B in tax revenue for nothing in return? Then, all the other major cities will be lining for the same thing. There's normally a deal in exchange that gets hammered out so as to not so overtly piss off every other major city in the country and cost votes.

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Originally Posted by davewindsor

Do you have a breakdown? How much does the Federal Gov't spend on subsidizing Section 8 low income housing in Detroit? How much do they spend on guaranteeing mortgages? How much do they spend on the Dept. of Homeland Security in Detroit? What else does the Federal Gov't subsidize in the city? Do these costs all get downloaded to the city in return for forgoing Federal Tax revenue? And after that, what's the real savings? Why would the Fed. Gov't just forgoe $2B in tax revenue for nothing in return? Then, all the other major cities will be lining for the same thing. There's normally a deal in exchange that gets hammered out so as to not so overtly piss off every other major city in the country and cost votes.

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Sorry, my crystal ball is at the repair shop....

You're asking a lot of simplistic questions, for which many of them either are not applicable [[such as Homeland Security... the whole country is paying into the border security... not just local folks), or may not be that applicalbe any more [[due to the housing collapse, much of Detroit cannot get a mortgage for home purchase... those more affluent areas that can, probably don't qualify for HUD).

Any statistics that are availabe can easily be Googled by those with a need to know.

As for the rest of the country being pissed.... no doubt... this idea is not going to go anywhere...

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Originally Posted by Gistok

What makes you assume that we get $1 in services for every $1 in taxes? We don't.... Michigan is a donor state.... in that sense we're more like Alberta.

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That has been true for a long time but I think I read somewhere just recently that Michigan is no longer a donor state. Yea!

Sadly, the reason given was that Michigan's economy has been so much worse than other states. Boo! :[[

From Since 2007, Michigan Has Moved From a Donor State to a Beneficiary When It Comes to Federal Dollars:

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For the full article, see Todd Spangler, "Michigan now getting back more money from Washington than it sends", Detroit Free Press, June 26, 2011.

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I can't find that Free Press article.

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Originally Posted by corktownyuppie

From The Detroit News: http://detnews.com/article/20110922/...#ixzz1YgKrVMs9

I kinda like it. I'd much rather the $15-$20k I pay in federal taxes come right back to the city. That's 10-15x how much I'm paying city taxes. Could you imagine what this would do with the city budget? Plus you'd be reducing the property taxes and eliminating the income tax?!

What do we need to do to get this some political traction??

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This idea is completely pointless... First off, this plan has no chance of actually happening, and secondly, taxes are not the problem in Detroit.

If you make $40,000 a year, your city income tax will work out to less than $1000. Paying an extra $80 a month in taxes kinda sucks, but a much bigger problem is the fact that insurance rates are out of control in the city, and your auto insurance alone will cost you $100-$300 a month more in Detroit.

Detroit property taxes are high, percentage wise, but when you factor in the extremely low cost of real estate in the city, the actual dollar amount of tax paid is less than what you would pay for the same house/property located outside of the city limits.

For my entire life, I have been listening to people list off the reasons why they left Detroit and/or will not move to Detroit, and the tax rates are way down the list of reasons.

The actual reasons why people don't want to be in the city are:

1. high crime rates
2. high crime rates
3. high crime rates
4. terrible police response to crime
5. bad schools
6. poor city services
7. outrageous insurance rates
8. unresponsive/difficult/burdensome red tape and bureaucracy.
9. almost any complaint other than high tax rates

The higher tax rates in the city are much less of an issue than all of these other problems.

Any plan or concept to "save the city" that doesn't address any of these primary issues is bound to be ineffectual at best, and most likely a complete failure.

Erikd, good points. However, on many occasions on this forum, people have expressed that the city's income tax is a main reason they won't live in the city. I don't know, maybe they don't want to state the obvious problem as you stated, and that is that the crime rate here in the city is too high. Now, looking at the city income taxes taken out of my paycheck, it averages out to be about three to four dollars a day. Come tax time I usually get a refund. Now, I could always use an extra three to four dollars a day, but if, in theory, that money is going towards city services that the suburbs do not offer, then it's an acceptable sacrifice for living in Detroit.

People complain about the high taxes here in Detroit, but if they lived in NYC or Chicago they'd being paying even more. The suburbs can claim that they have lower taxes, but very few can offer the kind of urban environment that the city offers [[ the positive things of course). Again, the city income tax I can live with, but as Erikd has stated, the high crime rates are the reasons people leave the city or have no desire to move into it. Reducing the crime rates in this city will go far in improving the city. Hansan Clarke's tax-free plan will never see the light of day.

I agree that crime is the worst problem, encompassing the Top 5 [[maybe Top 10, even?) reasons that keep people from Detroit.

Lowering taxes doesn't solve crime.
It's worth emphasis, so I'll say again. Lowering taxes doesn't solve crime.

Now if you take the amount that people pay in property tax and income tax and instead used it to pay for private security, a la Palmer Woods/Indian Village, I think THAT will reduce crime.

If you make property taxes competitive, you make it easier for investors to justify bulldozing an torched, abandoned house and rebuild a new one for renters to live in. That reduces blight. That reduces crime.

And you know, maybe it's not the best way to reduce crime. And maybe the idea will never happen. I'll admit it's out of the box. What Detroit is facing is that it's business model is broken. You have the expenses of the infrastructure built for 2 million people but less than half the capacity is used.

It's like you're driving a school bus for 40, but only 3 students are on the bus. The amount you'd have to charge them to pay for the bus's expenses would be ludicrous. So whatever solution you get is gonna require some out of the box, creative thinking.

I still think Clarke's idea has merit behind it, even though it's probably not going to happen.

Alot of yall have good ideas and one [[my opinion) of the biggest problems in getting ppl in the city is the High Insurance rates. Its alot of Detroiters who change their ID's to suburb addresses just because of the high insurance, so they live in the city but are Farmington Hill residents [[Example). If the insurance issue gets handled that would be a great start. Crime is a huge problem and Lord only knows what to do about that. I seriously think that drugs need to be designated to certain areas. or at least those streets where its only one hous on the block and some cases the whole neighborhood. The whole lock em up has been going on for decades and guess what. Nothing had changed. Drugs are not going anywhere and the history of it proves that no matter how many ppl you lock up it will always be someone next in line. I say move the dealers to areas ppl dont complain and whatever happens happens. as long as killing slows down or stops let them hustle. If they on a street that neighbors complain move em.
Clarke plan could be viable if he worded it right. Make Detroit a Free Trade Zone and we'll be booming like never before.

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Originally Posted by corktownyuppie

If you make property taxes competitive, you make it easier for investors to justify bulldozing an torched, abandoned house and rebuild a new one for renters to live in. That reduces blight. That reduces crime.

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In other words, if you lower taxes that reduces crime.

I don't know. It depends, and it's too hard to draw a direct line. I do know that lower taxes attracts investment. How that will or won't effect crime is unknown. But to say that they're totally unrelated is an unfair statement.

"I do know that lower taxes attracts investment."

Does it? There's a lot of places in the US that have low taxes that can't attract investment if someone's life depended on it. There's lots of places that have high taxes that have no problem attracting investment. I wouldn't say taxes don't matter at all but the impact is on the margins. Otherwise, everyone would be investing in South Dakota or Mississippi.

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Originally Posted by Novine

"I do know that lower taxes attracts investment."

Does it? There's a lot of places in the US that have low taxes that can't attract investment if someone's life depended on it. There's lots of places that have high taxes that have no problem attracting investment. I wouldn't say taxes don't matter at all but the impact is on the margins. Otherwise, everyone would be investing in South Dakota or Mississippi.

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Point taken. I overstated. I think it's fair to say that in the city limits of Detroit, there are multiple factors that drive away investment.

[[1-9) Crime
[[10) Red Tape
[[11) Taxes
[[12) Uneducated workforce
[[13) High Insurance Costs

...and the list goes on.

I'm not one of these Tea-Party Republicans who says GET RID OF TAXES. That's not the point I was making, so I want make that clear. Hell, even Hansen Clarke wasn't making that point.

Taxes are a problem in Detroit, they're too high.
The level of services are a problem in Detroit, they're too low.

Yes, some of that is because of corruption.
Yes, some of that is because of poor management and incompetence.
But the biggest reason is because Detroit as entity was designed for time very unlike the one we're in.

Lowering taxes is not the solution, and I hope no one thinks that is my position. Clarke's assertion [[and likely unfeasible) was to eliminate local taxes in order to attract population, and make up the the shortfall in the budget by substituting federal taxes we're already paying for 5 years. The idea being that you stop the bleeding, you bring back a critical mass of people, you re-design the a smaller, leaner city that is sustainable.

Realistic? Probably not. But at least we're thinking outside the box.

I don't think Detroit should run itself like a business. It's a municipality and needs to serve its citizens. But it shouldn't pretend like money doesn't matter, either. It needs to have a healthy sustainable inflow and outflow of money. And it hasn't for years.

There's a lot of problems in Detroit. Not all of them can be solved by having more money and capital come into the city. But most of them will get worse if capital leaves, and many of them can get better if capital returns.

Taxes are a part of that, that's all I'm saying.