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

[fryar]

Not to take away from the industriousness of Southeasterners and Westerners, but let's take a deep breath and acknowledge that these regions are playing catch up with the old economic powerhouses.

India's economy is also booming. Their tax regime is surely onerous, and their legal system is supposed to be pretty crappy indeed.

[davewindsor]

"Do you really think that local personal income taxes for a CEO making $5m a year does not factor into the decision making process of whether to operate from Detroit or a large city in Texas?"

That CEO could have moved Comerica up Woodward to the suburbs and paid no local income tax.

Some of the CEOs did move their headquarters from downtown to the suburbs and others left for Texas. Take, for instance, the Ford Motor Company. Another company founded in Detroit. Henry Ford II built the Ren Centre in downtown in the 70s and moved Ford's HQs back to the city. His predecessor comes along and moves Ford from downtown back to Dearborn. GM moves from the Cadillac Center in New Center to the Ren Centre, so no gains, just losses. A lot of office jobs were moved out of the city.

Why did Ford move their HQ to Dearborn?

Let's see. Executive compensation. Bill Ford, CEO of Ford, salary plus cash bonus for 2010 was $4.1m. That doesn't include stock options. If he still had Ford's HQ in the city, he would be paying $61,500 on his salary and bonus if he didn't live in the city, but had their HQ there. Mulaly made $10.85m. That's $162,750. Why would they ever move their HQ back to the city instead of staying in Dearborn? Makes no sense. They are motivated by self-interest to keep their HQ and offices out of the City of Detroit. http://media.ford.com/article_displa...ticle_id=34324

[fryar]

I will, however, play ball on the starve the beast concept. To be truthful, what would we all rather see: the income tax remaining in place, or the "state of emergency" thinking, as someone said once?

[Novine]

Detroit's city income tax dates back to the early 1960s. No need to blame the city's decline on the riots. It's always been about the income tax.

https://www.detroitmi.gov/Department...4/Default.aspx

[fryar]

Some of the CEOs did move their headquarters from downtown to the suburbs and others left for Texas. Take, for instance, the Ford Motor Company. Another company founded in Detroit. Henry Ford II built the Ren Centre in downtown in the 70s and moved Ford's HQs back to the city. His predecessor comes along and moves Ford from downtown back to Dearborn. GM moves from the Cadillac Center in New Center to the Ren Centre, so no gains, just losses. A lot of office jobs were moved out of the city.

Why did Ford move their HQ to Dearborn?

Let's see. Executive compensation. Bill Ford, CEO of Ford, salary plus cash bonus for 2010 was $4.1m. That doesn't include stock options. If he still had Ford's HQ in the city, he would be paying $61,500 on his salary and bonus if he didn't live in the city, but had their HQ there. Mulaly made $10.85m. That's $162,750. Why would they ever move their HQ back to the city instead of staying in Dearborn? Makes no sense. They are motivated by self-interest to keep their HQ and offices out of the City of Detroit. http://media.ford.com/article_displa...ticle_id=34324

It's not necessary for you to look up public data to underline the idea that Bill Ford does not mind pocketing a bunch of money. I don't think anyone is going to argue that particular point.

The press release linked to does indicate that Ford voluntarily reduced his own salary by 30%, though, which lends credence to the idea that it's not so much the income tax foregone, it's that it doesn't buy you very much.

Those $225,000 or so in additional income to the city of Detroit from Bill Ford and Alan Mullaly are not as significant as all the little dollars and cents that will arise from tax collections from a dynamic economy of smaller players.

Further, it is not clear to me that they would return, anyway. I think they like sitting in a Grand Marquis and cruising down that multi-lane road [[I'm guessing Ford Road?) to work.

[fryar]

Every other thread on this board I look at tempts me to post some kind of snarky comment about how we should be focusing on the income tax, which is killing itself, not this meaningless drivel.

From another thread:

We have some winning quotes in this article, too. I've put them in italics for fun.

From The Detroit News, "the Home Newspaper":

June 10. 2011 2:42PM
Detroit slowly returning power; expects all service to be back today

Santiago Esparza and Darren A. Nichols/ The Detroit News

Detroit —The city is incrementally restoring power to buildings, traffic signals and other sites that lost power Thursday when its antiquated system failed.
[[...)

Not to take away from the industriousness of Southeasterners and Westerners, but let's take a deep breath and acknowledge that these regions are playing catch up with the old economic powerhouses.

Upgrading the referenced infrastructure would do more, right now, to keep business in Detroit and facilitate the starting of new businesses, than lowering or eliminating the income tax rate. One advantage that newly built-up places enjoy is that their infrastructure is less outdated. This problem exists all over the place, Detroit could really enjoy a competitive advantage in this one area for anyone looking to employ highly educated grads from prestigious universities vis-a-vis a lot of other old-line cities.

I work from home, but I do have "remote" appointments I need to keep, and I am under the impression that I will need to consider having a balcony and sticking a gas-guzzling generator on it [[that's actually not a thought specific to Detroit).

[davewindsor]

Those $225,000 or so in additional income to the city of Detroit from Bill Ford and Alan Mullaly are not as significant as all the little dollars and cents that will arise from tax collections from a dynamic economy of smaller players.

But, if you had companies like Ford that stayed in the city, you'd also have a lot of their employees stay in the city, which would increase the demand for housing and, thus, increasing the property values and assessments which would increase the property tax base. Higher paid execs would live in Indian Village again raising those property assessments. The point is the city would get their money back and then some through property taxes.

I think there are a lot of companies that would like to stick to tradition and history and live in a city where they were founded, but they aren't motivated anymore because they keep getting f'd up the ass by the local taxing authority. Look at how many times the Ford family has given to the city. In the 1950s, the Ford Family donated $300m in artwork to make the DIA world class and put the city on the map. They donated a couple million to build the Ford Auditorium so Detroit could have a world class symphony. They built the Ren Centre to try to revitalize downtown after the riots. And how does the city respond? There comes a point when some of the greatest companies this city has ever seen get fed up with trying and leave. And it will continue if the city continues following this destructive path of raising personal income taxes so execs move their corporations out of the city.

[fryar]

Valid points, I agree with almost all of them.

I disagree that the high-powered executives would move to Indian Village on account of the personal income tax. If Detroit had never lost the Fords of the world to begin with, Ford executives might now be living in Indian Village.

Maybe eliminating the personal income tax is most valuable at effectively communicating a whole host of other changes that are being made, where these other changes actually constitute the compelling reason to consider living in Indian Village? I'm trying to see it your and Sehender's way here.

[DetroitPlanner]

Ford's HQ was never in the RenCen. They had North American operations out of it.

[Novine]

"Ford's HQ was never in the RenCen. They had North American operations out of it."

I thought this might be true but don't know enough about Ford corporate history to know whether that was a fact or not. From the viewpoint of the auto company, other than the operations in the Renaissance Center, when has Ford ever had a significant presence in Detroit proper? Wasn't the Model T built in Highland Park? Didn't Henry Ford move his residence from the city in 1915 when he moved to his Fairlane Estate in Dearborn? If I remember correctly, Ford made it a point not to build in the city, building facilities all over SE Michigan but not in Detroit proper.

[Fnemecek]

I think that the statement that the income tax is killing itself is hyperbole. You have to fix the ambulances, the police, the DFD, the schools, you can't have firestorms, etc. As far as one-shot hail mary's go, my money's on the concept behind the M-1. Not the income tax.

You do that right, people will gladly pay a premium to live between the man-made rivers that are the Lodge and I-75/I-375, because they will be able to have some vague approximation of Manhattan while staying close to home.

I believe it's a false choice to say that Detroiters have to choose between lowering our taxes and having world class services. The City of Detroit has a general fund budget that amounts to roughly $4,300 per resident. If we completely eliminated the income tax for residents and non-residents alike, that would drop all the way to $4,000 per resident.

Most cities our size are around $1,500 - $2,500 per resident. Hell, NYC is at $3,900 per resident and they've got services that are off the charts in comparison to most other cities [[NYPD's response time is 3 mins. vs. 7 mins. for the national average, street lights are rarely out, parks are exceptionally well-maintained, etc.).

There is plenty of room to cut in our bloated budget. We can eliminate the income tax and still have world class services.

[Novine]

"The City of Detroit has a general fund budget that amounts to roughly $4,300 per resident."

Not true. Detroit's General Fund is $1.3 billion give or take some millions. That works out to be about $1800 per resident. As you've stated before, hundreds of millions are going towards paying off past and current debt which means that leaves Detroit at the low end of the range of dollars per resident you listed, not at NYC levels.

[Orthophonic]

"Ford's HQ was never in the RenCen. They had North American operations out of it."

I thought this might be true but don't know enough about Ford corporate history to know whether that was a fact or not. From the viewpoint of the auto company, other than the operations in the Renaissance Center, when has Ford ever had a significant presence in Detroit proper? Wasn't the Model T built in Highland Park? Didn't Henry Ford move his residence from the city in 1915 when he moved to his Fairlane Estate in Dearborn? If I remember correctly, Ford made it a point not to build in the city, building facilities all over SE Michigan but not in Detroit proper.

Ford did make the Model T on Woodward Ave. in Highland Park. Initial manufacturing of the Model T was done in the plant at 411 Piquette Ave. starting in about 1908 or so. Ford [[Ford's?) moved this operation to the Highland Park factory in about 1910 or so. Also remember that Henry Ford II was a big driving force behind building of the Renaissance Center. The Lincoln-Mercury division was located in the Renaissance Center for a time. Clearly that became a bit awkward when GM purchased the building, and the L-M HQ was moved to California.

Of course, that move was used in a typical anti-Detroit fashion by writers such as Jim Mateja of the Chicago Tribune: "It's not a matter of employees kicking and screaming about being uprooted from lovely downtown Detroit, as it is airline agents being swamped with requests for seats on the next outbound flight, realty agents being hounded to plant "for sale" signs on the lawns of Michigan homes and workers from Ford Division saying it probably wouldn't be all that bad working for the smaller Lincoln Mercury Division.
Even under water, California offers more than Detroit could or would...." [[2/26/1998)

But Ford Motor has really been most heavily concentrated in Dearborn.

For what it's worth, Henry Ford [[the original) originally lived at 140 Edison Ave. from 1908-1915 before moving to Fair Lane and is buried in a cemetery at St. Martha Episcopal church in Detroit, 15801 Joy Rd. near Greenfield.

[davewindsor]

Ford's HQ was never in the RenCen. They had North American operations out of it.

Where do you get your facts from?

Lee Iacocca, who was the President of Ford from 1970-78 before being fired and rehired by Chrysler, stated in his autobiography that Henry Ford II, who was the CEO, moved Ford's HQ into the Ren Centre after he built it because Henry Ford II had trouble getting it occupied by other tenants and it was Henry Ford II's dream to see it filled after he built it. Henry Ford II had his office in the in the Ren Centre and basically lived there. There were so many Ford employees moved into the Ren Centre because he couldn't get other tenants that Iacocca said Henry Ford II referred to it as Ford City. Are you calling Lee Iacocca a liar now?

[Fnemecek]

"The City of Detroit has a general fund budget that amounts to roughly $4,300 per resident."

Not true. Detroit's General Fund is $1.3 billion give or take some millions. That works out to be about $1800 per resident. As you've stated before, hundreds of millions are going towards paying off past and current debt which means that leaves Detroit at the low end of the range of dollars per resident you listed, not at NYC levels.

True. Of course, I've also argued that that debt needs to be refinanced. Mayor Bing proposed doing so two years ago, but never did. Hence, I include that in the numbers because it's money that should be available.

[iheartthed]

Where do you get your facts from?

Lee Iacocca, who was the President of Ford from 1970-78 before being fired and rehired by Chrysler, stated in his autobiography that Henry Ford II, who was the CEO, moved Ford's HQ into the Ren Centre after he built it because Henry Ford II had trouble getting it occupied by other tenants and it was Henry Ford II's dream to see it filled after he built it. Henry Ford II had his office in the in the Ren Centre and basically lived there. There were so many Ford employees moved into the Ren Centre because he couldn't get other tenants that Iacocca said Henry Ford II referred to it as Ford City. Are you calling Lee Iacocca a liar now?

Ford's HQ has been in Dearborn since the at least the 1920s. It has always been there. It was never in the Ren Cen.

[davewindsor]

Ford's HQ has been in Dearborn since the at least the 1920s. It has always been there. It was never in the Ren Cen.

And you know this from?

[Fnemecek]

Oh, and one other thing that I should add to the discussion about Detroit and its budget in comparison to other cities, is that other cities also have enterprise agencies and debt that they're paying off. I believe it's a bit indigenous to argue for excluding everything associated with debt service or enterprise agencies in Detroit while still including those numbers when talking about other cities. Those two things either have to be included across the board or excluded across the board for any valid comparison.

More importantly, the simple fact that Detroit has debt from previous years or that some of our departments have budgets that are paid for fees rather than taxes doesn't change the fact that Detroit can afford to have world class services and still lower our tax burden. Other cities our size have done it, often with even less population density than Detroit. Detroit can do it, too.

[iheartthed]

And you know this from?

Because I know and everyone in Detroit knows that Ford was never HQ'd there. You're starting to sound really stupid for trying to defend such a blatantly inaccurate statement... Especially in the audience of people who would be most likely of group of people on Earth to know exactly where Ford has been for the last 100 years.

Google "Renaissance Center Ford Headquarters" and you won't find a single link, other than this thread, saying that Ford was ever HQ'd in the Ren Cen. The Ren Cen was financed by Ford but it was never the HQ. It was a product of the Ford Motor Company's foray into real estate. Ford had some offices in the Ren Cen, but again it was not the HQ. Ford's HQ has been in Dearborn since before my grandparents were born and has never left.

[davewindsor]

Because I know and everyone in Detroit knows that Ford was never HQ'd there. You're starting to sound really stupid for trying to defend such a blatantly inaccurate statement... Especially in the audience of people who would be most likely of group of people on Earth to know exactly where Ford has been for the last 100 years.

Google "Renaissance Center Ford Headquarters" and you won't find a single link, other than this thread, saying that Ford was ever HQ'd in the Ren Cen. The Ren Cen was financed by Ford but it was never the HQ. It was a product of the Ford Motor Company's foray into real estate. Ford had some offices in the Ren Cen, but again it was not the HQ. Ford's HQ has been in Dearborn since before my grandparents were born and has never left.

Quote the link that says it was always in Dearborn. Have you actually read Iacocca's autobiography?

Just because you can't google it proves it doesn't exist sounds really stupid. Why did Henry Ford II spend $2.7m to furnish his personal office in the RenCen? Is this something a CEO does if it's not a major move by Ford? It's on page 107 of Lee Iacocca's, An Autobiography. On page 106, Iacocca states Ford's original commitment of $6m ends up being $100m using corporate funds building the RenCen. Iacocca also stated Ford invested another couple hundred million moving his employees into the RenCen in trying to fill those office towers. And this is just opening up a random page in the book.

No, but you know better from rumours and second hand information and places you can't tell me where you got your information from and whether these were ever from people who actually ran the Ford Motor Company. According to you, Ford just had some offices there. like it was some trivial contribution to the RenCen.

[iheartthed]

Quote the link that says it was always in Dearborn. Have you actually read Iacocca's autobiography?

Just because you can't google it proves it doesn't exist sounds really stupid. Why did Henry Ford II spend $2.7m to furnish his personal office in the RenCen? Is this something a CEO does if it's not a major move by Ford? It's on page 107 of Lee Iacocca's, An Autobiography. On page 106, Iacocca states Ford's original commitment of $6m ends up being $100m using corporate funds building the RenCen. Iacocca also stated Ford invested another couple hundred million moving his employees into the RenCen in trying to fill those office towers. And this is just opening up a random page in the book.

No, but you know better from rumours and second hand information and places you can't tell me where you got your information from and whether these were ever from people who actually ran the Ford Motor Company. According to you, Ford just had some offices there. like it was some trivial contribution to the RenCen.

Do you have any idea of what it would take for a publicly traded company to officially move its HQ? Henry Ford II can furnish an office all he wants, but this decision was not his alone to make. Ford's board of directors and shareholders would have to approve an HQ move to Detroit and then approve another one back to Dearborn. I'm pretty sure we would have heard something about that and it would have been readily available in a Google search. I don't need to read Lee Iacocca's book to know that.

[DetroitPlanner]

Dave here is a source, the same website you used to make your original argument about salary. Here it says it was home of Ford Motor Division, not the corporation.
http://corporate.ford.com/about-ford...issance-center

Just because the Duece had an office there it does not make it the HQ. I am sure the Duece had several offices. I wonder if the duece paid his commuter tax being that he was good buddies with CAY?

[davewindsor]

Dave here is a source, the same website you used to make your original argument about salary. Here it says it was home of Ford Motor Division, not the corporation.
http://corporate.ford.com/about-ford...issance-center

Just because the Duece had an office there it does not make it the HQ. I am sure the Duece had several offices. I wonder if the duece paid his commuter tax being that he was good buddies with CAY?

The link does not deny the corporation was moved to the RenCen. It just says he moved Ford division corporation offices, "Henry Ford II was such an undaunted supporter of the Renaissance Center that he moved Ford Division corporate offices to the cluster of majestic spires along the Detroit River"

I don't know if it was a legal tax loophole like having the registered agent of a corporation in Dearborn to avoid the 1% local City of Detroit corporation tax, but unofficially the RenCen was where Ford was being run from if not officially. I'm not going to re-read a 340 page book to cite pages just to prove a point that Iacocca's basically saying Ford was run out of the RenCen. But, it's in there.

[HistoryNotHisStory]

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

Sounds good to me!

[HistoryNotHisStory]

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



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".

The idea is not misguided thinking.

By state law, the City of Detroit population has reached under $750,000 and should no longer have an income tax.

When I lived in other communities in Southeast Michigan, I did not have to pay income tax.

Why should I pay income tax to Detroit? For what?

Detroit requires drastic measures. Making Downtown Detroit, Midtown, New Center, and other areas Tax Free zones will bring true renaissance to the city.

Look at what the Empowerment Zone? It resulted in manufacturing facilities being built and remaining in Detroit. These manufacturing facilities created JOBS.

For Detroit to be reborn we must think on these terms.