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.

[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.

[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]

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.

[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.

[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.

[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??

[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......

[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.

[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.

[wolverine]

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.

Exactly. The rich will always try to stay rich and there certainly are ways to get through loopholes. But for most of us, we'll just do things the right way and accept this as part of life.

[Hermod]

Exactly. The rich will always try to stay rich and there certainly are ways to get through loopholes. But for most of us, we'll just do things the right way and accept this as part of life.

The not-so-rich do it as well. Northern Virginia residents purchase their packaged alcohol in DC where the whiskey tax is low. Virginia ABC often has spotters at large DC liquor stores and if they see a car with Virginia plates loading up a lot of cases, they will have it stopped when it enters Virginia for possession of alcohol with taxes unpaid in Virginia. Folks in Virginia often register their cars in Maryland to avoid Virginia personal property taxes on their autos.

[rb336]

I don't think a sales tax is a wise idea. Those cities that have such a tax are tourist destinations and/or are situated in such a way that it isn't convenient to leave the city to shop. I know a lot of people in Chicago. None of them shop in the city for anything but groceries. They go to the suburban malls or even the Michigan City outlet center. IN LA's case, I think it is a county-wide tax.

As far as bar/hotel taxes, Detroit has those and the funds are directed to development [[this is where the hockey arena funding originates - from a tax approved by the people specifically for such developments)

[jj84]

I don't think a sales tax is a wise idea. Those cities that have such a tax are tourist destinations and/or are situated in such a way that it isn't convenient to leave the city to shop. I know a lot of people in Chicago. None of them shop in the city for anything but groceries. They go to the suburban malls or even the Michigan City outlet center. IN LA's case, I think it is a county-wide tax.

That makes no sense, if they are doing it to avoid tax. Tax in Chicago is 9.25%, Tax in the Cook County part of Schaumburg is 9.00% [[where Woodfield, Ikea are at), Dupage CO is 8% but there are just basic stores there. Rosemont where the new Outlets just opened is also 9.25%

Michigan City is 7%, It is 65 miles from Chicago to Michigan City [[130 round trip), unless you're buying over $1,300 it isn't worth the drive, and that isn't taking into account wear on your vehicle or time, or if you use the Skyway to avoid traffic which will be about $4.00 in tolls [[each way) assuming you have an I-pass and get discounted tolls.

Now if they go up to Pleasant Prairie in Wisconsin the tax rate is 5.5% and is also about 65 miles away, you'll pay tolls going this way which are also about $4.00 with an Ipass [[each way) So here you'll only need to spend about $1000 to make it worth while of the drive, then also not taking wear and tear on the car.

[aj3647]

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.

This would only apply to those who live in Detroit. Which further illustrates how dumb this idea is. The people you're really wringing extra money out of are not suburbanites, but Detroiters.

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.

Tea Partiers like sales taxes, because they are a regressive form of taxation. They see sales taxes as a preferred alternative to income and property taxes. Tea Party darling Herman Cain ran on a platform of drastically reducing the federal income tax rate and replacing that revenue by levying a 9% national sales tax.

Income taxes are a progressive from of taxation. By replacing income taxes with sales taxes, you shift the tax burden from the rich to the poor. Which is ultimately what conservatives want. They aren't anti-tax, they're anti-progressive tax. After all, someone has to pay for our giant military apparatus and overseas military adventurism, and conservatives would rather that poor people be wrung for every cent possible so that rich people don't have to pay a dime.

[MikeyinBrooklyn]

By replacing income taxes with sales taxes, you shift the tax burden from the rich to the poor.

FOILED! Yes, you've discovered my plot to keep the poor poor! Oh, wait. The war on poverty is already doing that for me... Seriously dude, just because you're paranoid doesn't mean that we're out to get you.

Several things not mentioned about sales taxes: in most scenarios, neither food nor rent are taxed, meaning the 2 biggest expenditures for the working poor are not taxed. It is easier to collect than either property or income taxes, leading to a significantly higher compliance rate than the other forms of taxation. It's proceed projections can be tracked with accuracy every month, allowing governments to adjust their spending throughout the year to avoid red ink at the end of the year. Lastly, it does not require the rank and file citizen to file paperwork, itemize expenditures, etc. Government is not making any judgments, unlike income and property taxes, where the state is determining what kind of citizen you are, which classifications qualify/disqualify you from assessments/breaks etc. You just pay your rate at the register for the items that are taxable. Also note: nothing paid for with food stamps is eligible to be taxed under federal law.

[EastsideAl]

FOILED! Yes, you've discovered my plot to keep the poor poor! Oh, wait. The war on poverty is already doing that for me... Seriously dude, just because you're paranoid doesn't mean that we're out to get you.

Several things not mentioned about sales taxes: in most scenarios, neither food nor rent are taxed, meaning the 2 biggest expenditures for the working poor are not taxed. It is easier to collect than either property or income taxes, leading to a significantly higher compliance rate than the other forms of taxation. It's proceed projections can be tracked with accuracy every month, allowing governments to adjust their spending throughout the year to avoid red ink at the end of the year. Lastly, it does not require the rank and file citizen to file paperwork, itemize expenditures, etc. Government is not making any judgments, unlike income and property taxes, where the state is determining what kind of citizen you are, which classifications qualify/disqualify you from assessments/breaks etc. You just pay your rate at the register for the items that are taxable. Also note: nothing paid for with food stamps is eligible to be taxed under federal law.

None of which makes sales taxes any less regressive. Short of taxing lower incomes at a higher rate [[also effectively done in the U.S.) sales taxes are about the most regressive form of taxation there is

[iheartthed]

None of which makes sales taxes any less regressive. Short of taxing lower incomes at a higher rate [[also effectively done in the U.S.) sales taxes are about the most regressive form of taxation there is

But pretty much any tax system will disproportionately affect people at the lower end of the pay scale. I'm not sure that's a good reason to not have one...

[MikeyinBrooklyn]

Short of taxing lower incomes at a higher rate

Seriously, I think this would be a worthwhile experiment: the more you earn, the more you get to keep. I bet the working poor [[the non-working poor would be unaffected, of course) would seek out more hours, second jobs, etc, to get to a lower rate threshold.