Stephen Henderson: Help Detroit break its high-tax habit.

**Bishop** · June-06-11, 05:21 AM

Surprised no one mentioned this yet:

http://www.freep.com/article/2011060...high-tax-habit

The Senate, which must concur in the House action, should act instead to wean the city from its habit -- but without the shock of instant withdrawal.

Founder of the Detroit voter-education organization publius.org, makes the sensible suggestion that the Senate should put an expiration date on these taxes and lower them annually between then and now.

Everyone should contact the Senate Majority leader to push for attaching strings to the request to keep the income tax rate as it is in the city.

Thoughts?

**Bham1982** · June-06-11, 07:55 AM

The City, at this point, doesn't really have a realistic alternative to high taxes. Services are pretty terrible with existing funding.

**Hypestyles** · June-06-11, 08:15 AM

So does this mean that Newt Gingrich's tax-free detroit proposal is something to take a look at?

**DetroitPlanner** · June-06-11, 08:30 AM

Originally Posted by Bham1982

The City, at this point, doesn't really have a realistic alternative to high taxes. Services are pretty terrible with existing funding.

However, it did have an agreement broke by KK several years back to lower the income tax from 3 percent to 2 percent, with the commuter tax lowering from 1.5 to 1. Lowering the income tax would make living or doing business in the city easier to do, hence stabiling property values. Granted the region as a whole has lost property value, but Detroit's percentage, and the population drop may have been less as it makes it easier on the wallet to live or do business in the city whenever the taxes are closer to what would be paid elsewhere.

**ghettopalmetto** · June-06-11, 08:53 AM

This part right here tells you exactly how insane the author is:

First, start to cut the income tax rate for residents to bring it into parity with the rate for nonresidents. Then roll them both back, over time, to nothing. The utility tax could be reduced by one percentage point per year until it's gone.

Such actions could literally save Detroit's fiscal life.

That's right, kids! The way to fix Detroit's budget is to cut income taxes to zero! The services will pay for themselves!

Never mind that he left this whole current economic mess--which has dragged down tax revenues all across the country--completely unsaid.

Detroit would be better off shipping Mr. Henderson to Mississippi, where they still embrace this misguided type of "thinking".

**davewindsor** · June-06-11, 09:10 AM

Originally Posted by Bham1982

The City, at this point, doesn't really have a realistic alternative to high taxes. Services are pretty terrible with existing funding.

I see an alternative. Forced amalgamation of Metro Detroit or Wayne County into a supercity by the governor. Let every city in metro or the county pay their fair share so people working in Detroit don't have to pay income taxes.

**Novine** · June-06-11, 09:18 AM

"First, start to cut the income tax rate for residents to bring it into parity with the rate for nonresidents. Then roll them both back, over time, to nothing."

What Henderson proposes isn't legal under state law. The non-resident rate can never be more than 1/2 the rate that residents pay. If Henderson is going to propose solutions, how about starting with ones that aren't based in fairy tales?

On the financial side, Henderson must have never looked at Detroit's budget in detail. The local income tax raises almost as much revenue for general operations as is raised from local property taxes. It would be next to impossible to maintain even the basic level of city services without that revenue. Henderson claims that the income tax is regressive. But in Detroit, I'll bet that the property tax rates actually do more harm to low-income residents than does the income tax. I would love to see Henderson put up some numbers that back up his claim.

It's also a misguided focus by Henderson that taxes are what are keeping Detroit from being successful. While the high tax rates probably don't help Detroit's cause, the real problem is that Detroiters don't get the value in services for the taxes that they pay. Detroit is never going to be able to beat the suburbs in dueling tax rates. Detroit's property values are too low and the needs too great for it to be able to lower the overall tax burden to anything approaching what suburban residents enjoy. But that's true of almost every major urban area. Until residents and businesses feel like they are getting value in services for the taxes they pay, no amount of reduction in taxes is going to keep people from feeling like they are overtaxed.

**iheartthed** · June-06-11, 10:02 AM

Originally Posted by Novine

It's also a misguided focus by Henderson that taxes are what are keeping Detroit from being successful. While the high tax rates probably don't help Detroit's cause, the real problem is that Detroiters don't get the value in services for the taxes that they pay. Detroit is never going to be able to beat the suburbs in dueling tax rates. Detroit's property values are too low and the needs too great for it to be able to lower the overall tax burden to anything approaching what suburban residents enjoy. But that's true of almost every major urban area. Until residents and businesses feel like they are getting value in services for the taxes they pay, no amount of reduction in taxes is going to keep people from feeling like they are overtaxed.

I just wanted to cosign this right here.

**English** · June-06-11, 11:15 AM

I'd like to second that co-sign of Novine's post. The answer isn't to cut taxes, it's to improve services. And we can only do that by increasing revenue and stopping corruption/theft/waste.

**ndavies** · June-06-11, 12:57 PM

You have to decrease tax rates and improve services. Doing one without the other will not make Detroit competitive.

Nobody would buy an equivalent product for twice the price. Detroit offers basement bargain services and should charge basement bargain prices. It's the only way you will ever get any Detroit growth.

When Detroit starts offering top notch services they can afford to charge top notch tax rates. Until then, the population and businesses will continue to flee the city. We'll have to rewrite the population based taxes to account for another 25% population loss after the next census.

**iheartthed** · June-06-11, 01:02 PM

Originally Posted by ndavies

You have to decrease tax rates and improve services. Doing one without the other will not make Detroit competitive.

Nobody would buy an equivalent product for twice the price. Detroit offers basement bargain services and should charge basement bargain prices. It's the only way you will ever get any Detroit growth.

When Detroit starts offering top notch services they can afford to charge top notch tax rates. Until then, the population and businesses will continue to flee the city. We'll have to rewrite the population based taxes to account for another 25% population loss after the next census.

If you can't cut your prices without going out of business then maybe you should improve your product. Just a thought.

**ndavies** · June-06-11, 01:06 PM

Well if you can't sell your product without cutting prices you're going to be out of business anyway.

**professorscott** · June-06-11, 01:09 PM

The logical fallacy I see among some of the thoughts here is that your taxes are paying for services you need. Only a portion of them are.

Try this: Imagine a city exactly the size and population of Detroit. Imagine that city has exactly the same number of policemen and firemen as Detroit, but:
1. Does not run its own transit and paratransit services, but rather contributes into a regional transit system and so is only responsible for a portion of the administrative and building costs.
2. Has one-fourth the administrative staff.
3. Only operates departments that are absolutely necessary for the city to function. [[Litmus test: If Royal Oak doesn't have a department, then clearly a city can function without such a department.)

How much taxation would be required to support the governmental needs of that city? Why is Detroit not becoming that city?

**iheartthed** · June-06-11, 01:13 PM

Originally Posted by ndavies

Well if you can't sell your product without cutting prices you're going to be out of business anyway.

No. Ford did not improve its sales numbers by cutting prices. It improved by fixing its product [[and actually raised its prices). Chrysler could sell cars for $1 and be the number one automaker in the world overnight. It'd last about a week until they went bankrupt for good.

**ndavies** · June-06-11, 01:21 PM

But Ford's prices are still in line with it's competition. Ford is producing a superior product for the same price as it's competition.

That's definitely not the case of Detroit. Detroit's tax rates are 2 to 3 times more expensive than any other city in the state. Detroit is offering a yugo for the price of a Rolls Royce.

**iheartthed** · June-06-11, 01:52 PM

Originally Posted by ndavies

But Ford's prices are still in line with it's competition. Ford is producing a superior product for the same price as it's competition.

That's definitely not the case of Detroit. Detroit's tax rates are 2 to 3 times more expensive than any other city in the state. Detroit is offering a yugo for the price of a Rolls Royce.

And we don't disagree at all about that much. But Ford did not fix itself by slashing its prices.

Oh, and Detroit's competition is not other municipalities within Michigan.

**Novine** · June-06-11, 01:53 PM

"How much taxation would be required to support the governmental needs of that city? Why is Detroit not becoming that city?"

Because there's no realistic way for that vision of a city to work for Detroit. Do you believe that the population of Detroit and Royal Oak have the same needs and the same demands for city services? I don't. Do you believe that Detroit can unload its transit system and debts onto a regional authority? I've seen no support for that. Does Detroit needs to reduce its costs? Absolutely. Does it have the capacity to support the level of government services necessary to serve an urban city and urban population without a local income tax or a revenue replacement for it? Absolutely not.

**ndavies** · June-06-11, 02:10 PM

Originally Posted by iheartthed

And we don't disagree at all about that much. But Ford did not fix itself by slashing its prices.

Oh, and Detroit's competition is not other municipalities within Michigan.

Ford raised prices after it proved it had an equivilant product to sell. Ford will be lowering its prices to compete, once Toyota gets rolling again and fills thier lots back up with product,

Detroits competition is the inner ring suburbs. Detroits competition is every other city on the planet. IF it fails to provide competitive services at competitive prices it it going to continue to fail. If it has cheap taxes and still has shitty services it is going to continue to fail. If it has competitive services at outragous prices it is still going to fail.

The only way for Detroit to succeed is to have competitive services at competitive prices. It neeeds both.

A family moving to this region for a job is not going to move into a city with higher taxes and crappy city services. They are going to move to the suburbs. Hence Detroits complete lack of demand for houses and it's continuing loss of population..

If Detroit can't compete with other cities in Michigan how in the hell is it going to compete with other major cities in this country or the rest of the world.

**Fnemecek** · June-06-11, 02:17 PM

Originally Posted by Novine

On the financial side, Henderson must have never looked at Detroit's budget in detail. The local income tax raises almost as much revenue for general operations as is raised from local property taxes. It would be next to impossible to maintain even the basic level of city services without that revenue.

I've gone over the City of Detroit's budget in detail as well as the budgets over other major cities our size. I suspect that that I've spent considerably more time doing so than you have.

The Detroit Police Department has one of the largest budgets in the country on a per resident basis. Its budget is 61% above average. The problem is that DPD spends an enormous amount of money on administration, has more deputy and assistant chiefs than anyone else our size, and short changes our front-line operations.

If DPD was run by competent law enforcement professionals, we could easily trim $25 - $30 million or more from its budget and still have a top-notch department. Instead, we spend a lot of money while getting inferior results.

The City of Detroit also has a lot of duplication within its bureaucracy. For example, we have a Planning Division for the Dept. of Planning & Development as well as the City Planning Commission. Eliminate one of those two agencies and you immediately save a little over $1 million per year.

Then there's the fact that a significant portion our general fund budget goes to debt service. As part of his turnaround plan, Mayor Bing proposed refinancing that debt almost two years ago. Two years later, it still hasn't been done.

It's also a misguided focus by Henderson that taxes are what are keeping Detroit from being successful. While the high tax rates probably don't help Detroit's cause, the real problem is that Detroiters don't get the value in services for the taxes that they pay.

There are essentially two paths that we could follow and prosper. 1) Low taxes + low service levels or 2) high taxes + high service levels.

Either option would work. Most major cities go for option 2 and leave those who prefer option 1 for the suburban and/or rural communities. However, in the end, either option would work.

Unfortunately, Mayor Bing seems content to maintain the status quo of high taxes + low services levels, which only guarantees continual failure.

**iheartthed** · June-06-11, 02:25 PM

Originally Posted by ndavies

Ford raised prices after it proved it had an equivilant product to sell. Ford will be lowering its prices to compete, once Toyota gets rolling again and fills thier lots back up with product,

The point is that Ford did not slash its prices. It fixed its product. No more tail chasing.

Detroits competition is the inner ring suburbs. Detroits competition is every other city on the planet. IF it fails to provide competitive services at competitive prices it it going to continue to fail. If it has cheap taxes and still has shitty services it is going to continue to fail. If it has competitive services at outragous prices it is still going to fail.

Detroit is not competing against the suburbs. That mentality is quite pervasive in Michigan and is deeply flawed. Likewise, Troy or Canton isn't competing against Chicago or San Francisco.

**Detroitnerd** · June-06-11, 02:29 PM

Originally Posted by iheartthed

Detroit is not competing against the suburbs. That mentality is quite pervasive in Michigan and is deeply flawed. Likewise, Troy or Canton isn't competing against Chicago or San Francisco.

We are competing against other cities in the world. And when they look at the way we fight internally here [[under the banner of "competing locally") and cannot accomplish anything regionally, they say, "There's no way I want to get involved with those people."

**ghettopalmetto** · June-06-11, 02:30 PM

Originally Posted by iheartthed

Likewise, Troy or Canton isn't competing against Chicago or San Francisco.

Shhhhhh! Don't tell that to L. Brooks Patterson! He'd have you believe that Oakland County is on equal footing with London, Paris and Tokyo.

**iheartthed** · June-06-11, 02:40 PM

Originally Posted by ghettopalmetto

Shhhhhh! Don't tell that to L. Brooks Patterson! He'd have you believe that Oakland County is on equal footing with London, Paris and Tokyo.

Far be it from me to defend Mr. Patterson... But I think he may finally be getting the big picture now that his county's much protected credit rating is in serious jeopardy [[and will certainly be downgraded should Detroit go bankrupt).

**Novine** · June-06-11, 02:41 PM

"The City of Detroit also has a lot of duplication within its bureaucracy. For example, we have a Planning Division for the Dept. of Planning & Development as well as the City Planning Commission. Eliminate one of those two agencies and you immediately save a little over $1 million per year."

I'm sure there's a lot of duplication and waste. This isn't one of them. Jeff Wattrick made a similar claim on MLive. The two groups have entirely different responsibilities. It's like claiming that you don't need city hall staff because there's a city council. If this is duplication, why does every suburban community have a Planning Commission and departments of planning/building/development?

**ndavies** · June-06-11, 02:56 PM

Originally Posted by iheartthed

The point is that Ford did not slash its prices. It fixed its product. No more tail chasing.

Detroit is not competing against the suburbs. That mentality is quite pervasive in Michigan and is deeply flawed. Likewise, Troy or Canton isn't competing against Chicago or San Francisco.

Ford's vehicles are priced competitively so fixing them gave them a competitive advantage allowing them to charge higher prices.

Ford had to cut prices to get sales before they fixed the product. Or did you forget about all the huge Rebates and zero percent financing they offered to get rid of the old product nobody wanted. People believe Fords improved product is worth the price. Ford would still be offering huge discounts if it was relying on the old explorer for sales. You also forget the huge amounts of labor and cost cuts that occured for Ford to be price competitive. They didn't raise their prices to be competitive first. They cut their cost firsts.

The City of Detroit Hasn't fixed their product and even after it's fixed it will still be so expensive no one will buy it.

Detroit is in competition for people in the region. Everyday people in the Detroit metro region decide to move within the region. They consistently choose not to move to Detroit because of it's lack of services and high taxes. They predominately choose to stay in or move to the suburbs. So if they are making a choice between Detroit and a suburb, how can the cities not be in competition.

People in the USA move on average every 7 years. We have a market of over 4 million people in the greater Detroit area. That means statistically over 500,000 people move every year in the Detroit Metro region. I'm sure many of those people would choose to move to Detroit, If Detroit was competitive.