No tax zone for Detroit?

[iheartthed]

An idea proposed by former Speaker of the House Newt Gingrich to make the city of Detroit tax-free for 10 years is open to at least two of the region's highest leaders.

Gingrich asked the audience at the 2010 Mackinac Policy Conference to pretend Detroit "was like Puerto Rico," a notion that has been mostly well-received.

Detroit Mayor Dave Bing and Wayne County Robert Ficano told WJR's Paul W. Smith they would like to hear more, but it would take time if the decision were to be pursued.

"That is thinking out the box. There's a legislative standpoint you have to think of," Bing said. "We want to take care of people that are new to Detroit, but my concern is for people that are already there. You've got to do it with fairness the best you can," he said.

But, Bing added, "We've got a lot of land, we've got a lot of homestead. We want to look at that. I think it's a good idea."

http://www.mlive.com/business/detroi..._county_e.html

Thoughts?

[Gsgeorge]

I don't agree with everything Newt does or says, but this is something that seems like a no-brainer to me. Detroit's high taxes have always been puzzling. And Newt was not the first to propose it. I feel like Detroit's residents and businesspeople have been arguing for lower, or no, taxes in Detroit for decades. Do it now, and our city would explode with development, business, new residents. It seems like a quick-fix that might actually work.

[Detroitnerd]

Great right-wing plan. Unfortunately, where does the revenue come from in the meantime?

[iheartthed]

Great right-wing plan. Unfortunately, where does the revenue come from in the meantime?

I'm no Gingrich fan, but I'm also not opposed to a right-wing plan if it works [[emphasis on "if"). That said, I imagine that the revenue to support services could come from the city's personal income tax, and whatever property taxes would be paid by real-estate owners.

[Detroitnerd]

I'm no Gingrich fan, but I'm also not opposed to a right-wing plan if it works [[emphasis on "if"). That said, I imagine that the revenue to support services could come from the city's personal income tax, and whatever property taxes would be paid by real-estate owners.

Yeah, I think this is a trojan horse sort of plan. Cut BUSINESS taxes, shift the burden to individuals, then, when the budget deficit is too much to take, slash social programs and privatize. We've seen this before, right-wing saviors rushing to the rescue with plans that benefit their big-business cronies. [[Not that neoliberalism is much better.)

[Hermod]

Keep the city and state taxes to run the city and state. Make Detroit city proper a federal income tax free zone. Watch the population shoot up to 2 million. Watch the hoods get gentrified. Watch the kleptocracy get voted out of office. Detroit will become the center of good living.

[Melocoton]

I don't agree with everything Newt does or says, but this is something that seems like a no-brainer to me. Detroit's high taxes have always been puzzling. And Newt was not the first to propose it. I feel like Detroit's residents and businesspeople have been arguing for lower, or no, taxes in Detroit for decades. Do it now, and our city would explode with development, business, new residents. It seems like a quick-fix that might actually work.

#1) The city has been doing Renaissance Zones for decades, so some version of what Gingrich is proposing [[and has been pushing for years) is already in place. Hasn't produced any miracles yet as far as I know.

#2) in a no-tax city, who would pay for the police and fire department?

[Novine]

Been there, done that. Isn't that what Renaissance Zones were all about? How did those do to turn around the city?

On the practical side, where does the money come from to run the city? Last time I checked, Detroit's budget wasn't zero. How many suburbs are going to want to cover 100% of Detroit's costs at the same time that they are having to compete directly with Detroit's tax-free status?

[Novine]

If it's such a great idea for Detroit, let's make the entire state a tax-free zone! If it's good for Detroit, it should be great for Michigan!

[iheartthed]

If it's such a great idea for Detroit, let's make the entire state a tax-free zone! If it's good for Detroit, it should be great for Michigan!

Well, that's where development planning should come into play. Do we want businesses coming in and plopping down in any random part of the state, or do we want to direct them to certain areas?

For me to support the idea, I wouldn't even want them to designate the entire city as a no-tax zone. Instead concentrate on areas like the downtown and midtown business districts -- like NYC did Times Square -- or brownfields in the industrial sections of the city to encourage redevelopment. I'm not aware of the specifics about the Renaissance Zone, but I don't think it was a completely tax-free zone. And even still, didn't it work to bring Compuware downtown? And keep GM from going to the suburbs?

[Novine]

http://ref.michigan.org/medc/service...tax/chunk2.asp

Everything but debt millage is abated. Businesses can also get a MBT credit and residents don't have to pay the state income tax. In Detroit, the Utility Users Tax is waived.

http://ref.michigan.org/medc/service...stax/index.asp

If the Renaissance Zones didn't save Detroit, why would your idea work any better?

[iheartthed]

http://ref.michigan.org/medc/service...tax/chunk2.asp

Everything but debt millage is abated. Businesses can also get a MBT credit and residents don't have to pay the state income tax. In Detroit, the Utility Users Tax is waived.

http://ref.michigan.org/medc/service...stax/index.asp

If the Renaissance Zones didn't save Detroit, why would your idea work any better?

Well, apparently, the Ren Zone is primarily a property tax break. I think Gingrich's idea is to suspend business taxes in Detroit. I believe that would have to be approved at the state level anyway, since I don't think Detroit has its own corporate tax [[or at least I can't find information about one through my quick Google search). I assume that he would also advocate a lifting of the sales tax in Detroit on some goods sold in Detroit [[like NYC does for clothes). That tax is also implemented at the state level, and thus is not covered by Ren Zone.

[ghettopalmetto]

Why do people think the problem is always "taxes"? Many, far-more-thriving places have higher taxes than Detroit. On the other hand, people like Newt have been cutting taxes in the South for decades--and we see what an economic juggernaut Mississippi has become.

The problem in Detroit is the SERVICES, or lack thereof, that you get for your tax dollars. The tax base needs to be GROWN, not shrunk.

Until Newt buys a house in Delaware for the tax savings, I'm not convinced.

[Patrick]

Why do people think the problem is always "taxes"? Many, far-more-thriving places have higher taxes than Detroit. On the other hand, people like Newt have been cutting taxes in the South for decades--and we see what an economic juggernaut Mississippi has become.

The problem in Detroit is the SERVICES, or lack thereof, that you get for your tax dollars. The tax base needs to be GROWN, not shrunk.

Until Newt buys a house in Delaware for the tax savings, I'm not convinced.

How can Detroit expand their tax base though? Would they offer incentives? How do they attract initial action?

[mwilbert]

Some proposal from this family of ideas comes up with every so often. It could work, but it would require some other people someplace to pay the taxes that the people in Detroit [[and more importantly, the taxes that the folks who move into Detroit for the tax savings) don't pay, and I rather doubt that the people representing those taxpayers are going to think Detroit is worthier than many other poor [[or less poor) places. There also could be some pretty significant negatives. A tax advantage large enough to have a significant impact on the city would probably wipe out many of the suburbs--how would Southfield or Oak Park or Ferndale or Madison Heights or even Dearborn compete against a tax-free Detroit? I think there is enough space in the city that in ten years you might not displace too many poor folks, but that would also be a concern. I guess they could move to Southfield.

Even with the potential negative consequences I'd love to see it happen; if nothing else it would be a really interesting social experiment to watch. I suspect that if you could get enough people and business into the city, you could change a lot of the dysfunctional dynamics that currently exist. Then again, maybe not. The uncertainty is part of what would make it so interesting. However, since no one is going to be willing to provide the subsidy required, there is essentially no chance of this happening.

[BillyBBrew]

As much as I feel for suburbs losing their people to Detroit, are we forgetting that the reason the suburbs are populated and grew so much is because people left Detroit? Kinda like a deja vu.

[Russix]

Since we're a completely undesireable place to do business in, now that we'll have less money to try and fix the problems, things will get better. This is akin to saying, "You can have this poop for free now" and expecting a rush.

[Novine]

Then your proposal truly makes no sense. If you believe that high taxes are an obstacle to development in Detroit, how are keeping the property and income taxes in place, which are among the highest, if not the highest in the state, going to encourage people to come to Detroit? Making Detroit an enclave exempt from federal taxes? Good luck getting that through Congress. You can have that passed with the Free Ponies Act of 2010.

[Huggybear]

There is a difference between being less-than-intuitively-likely-to-succeed and "making no sense."

Would Detroit succeed in getting a federal tax reduction? You might guess no, but the federal government has done that on a zone-by-zone basis in many cities over the last decade or two. So that's not out of the realm of possibility. Whether you could get a significant abatement for a single city is a more difficult question, but you could certainly write a federal bill that covers cities in similar distress. So you can put this in the "difficult" category.

On the other hand, cutting state and local taxes really moves into the "making no sense" category given the massive fixed costs that the state [[primarily) has generated [[like roads) and that the city is trying to abate [[by downsizing). Every non-federal unit of government collects revenue from some tax or quasi-tax [[user fee) mechanism.

Then your proposal truly makes no sense. If you believe that high taxes are an obstacle to development in Detroit, how are keeping the property and income taxes in place, which are among the highest, if not the highest in the state, going to encourage people to come to Detroit? Making Detroit an enclave exempt from federal taxes? Good luck getting that through Congress. You can have that passed with the Free Ponies Act of 2010.

[ghettopalmetto]

What does cutting taxes do for Detroit, anyway? Are people supposed to magically move to Detroit to get a tax break for 10 years? What happens when they flee after the tax break expires? Are people who move to Detroit for a tax cut going to tolerate the level of services provided?

How about instead of Racing to the Bottom, we figure out a way where the federal money that would be spent on Huggybear's proposal instead be used to invest in, and upgrade, the existing infrastructure so that Detroit might be able to develop some sort of economy once again?

[Huggybear]

The CBD-only idea is actually undesirable for a number of reasons [[starting with the fact that it is too little and the wrong kind of land for a lot of ventures); I was discussing the saleability aspect. I think it's the whole city or bust. Small, fixed zones - like the Renaissance Zones to date - have had dismal success because being proposed by local government, they bear no necessary relationship to what people want. Floating zones [[or a city-wide zone) would be helpful.

The whole discussion about the City of Detroit foregoing its own revenue streams is absurd - because local units of government in "business-friendly" states still depend on collecting revenue. In this thread [[and in LBP's world), it has been used as a strawman for why abating the federal and state taxes can't work.

The impact in getting a zone to work is the federal end - where you have 33% taxes at the federal level and even more as the maximum personal bracket, this is where you have room to maneuver. I don't think there is a rational argument that eliminating this would be useless.

The idea to eliminate taxes strictly in the CBD is a red herring, as it effectively takes the city's largest taxpayers off the rolls. You might as well just eliminate all taxes.

Let's suppose that all taxes were to be eliminated in Detroit. Then what? The level of services provided is going to remain the same, at best. I wouldn't expect them to improve one iota. Are people going to flock to a city that doesn't plow the streets in the winter? Or barely has enough money to fund the police department? I think we've all seen that the empirical evidence suggests "no".

Let's think about why people and businesses locate where they do. People locate in a particular place because of jobs and quality of life. Businesses locate because of proximity to a capable workforce and markets for their goods. Anecdotally, I don't know anyone who has uprooted their entire life and spent thousands of dollars moving just to save 3% of their income on taxes. I do know plenty of people who have moved from Michigan to Chicago [[for example), though.

This Race to the Bottom--throwing subsidies at everything until something sticks--is nothing more than a manifestation of desperation and low expectations in the absence of ideas that work on a permanent basis and a wililngness to indulge in a little good old fashioned hard work. Detroit can do better.

[Jimaz]

I'm just trying to figure out what interest Newt Gingrich would have in giving Detroit "good" advice. He doesn't exactly strike me as the benevolent Detroit-lover type. What's in it for him?

[Zacha341]

Hah! I thought about that. Perhaps it is part of that nebulous scheme you hear about at the coney island or casino that once the "they" get all the black folks out de' city "they" gonna take it back over. LOL! Well now per the increasing "black flight" at as discussed in another thread on dyes, the dream may be coming closer. Hence, Newt getting everything prepped and primed as it were... *wink*

I'm just trying to figure out what interest Newt Gingrich would have in giving Detroit "good" advice. He doesn't exactly strike me as the benevolent Detroit-lover type. What's in it for him?

[royce]

No one so far wants to discuss eliminating the sales tax. Well, I'll just add this and then I'm done with this thread. Eliminating the sales tax will force a Kroger or Target to invest in at least one store in Detroit. Suburbanites will take a chance and shop in the city if the stores are near the fringe of the city[[state fairgrounds) and they can save money by buying in the city. Detroiters can also shop in the city instead of having to go to the suburbs for many household items. Unemployment should drop because more shopping in the city means more workers needed to work. Detroiters having jobs means that they have money which means income to the city in the form of income taxes, Crime should go down now that Detroiters have jobs.

An elimination of the sales tax won' t necessarity bring in new residents. The elimination of the sales tax would help those who already live here, with jobs and more disposable income. A healthy Detroit begins with people finding work and spending their hard earned money right here in the city.

[Novine]

"No one so far wants to discuss eliminating the sales tax."

That idea was kicked around during the Cobo expansion dispute. Ficano was pushing it as part of his plan to fix Cobo. That never went anywhere and I doubt a state legislature dominated by the suburbs and outstate communities struggling in this economy want to turn Detroit into a sales-tax free zone. Doing so would mean a loss of the funds for state revenue sharing and the school aid fund that would come from people avoiding the sales tax by shopping in Detroit.