Detroit must jettison its losing tax scheme

[MikeM]

Detroit must jettison its losing tax scheme

STEPHEN HENDERSON
DETROIT FREE PRESS COLUMNIST

Pay more. Get less.

That's the social contract Detroiters endure with city government.
They pay more kinds of taxes, at higher rates, than any other citizens in Michigan.
And the services they receive in return -- police response and fire coverage, public education and lighting -- are shoddy and embarrassing.

In most cities, taxes foot the bill for services, and in the most popular big cities -- Chicago, New York, Los Angeles -- it's common to pay more because of the amenities and social and cultural benefits of city life.

But in Detroit, our extreme tax rates have the opposite effect. Sky-high taxes help drive people and businesses out, yielding less of the revenue needed to deliver quality services, which encourages more people to leave. It's a destructive cycle that's driving the city's livability index into the ground.

More at:

http://www.freep.com/apps/pbcs.dll/a...te=fullarticle

Did anyone make a New Year's resolution to quit making excuses?

[Novine]

Hey Henderson, how about telling us how you think this can be achieved? If I want to read the "cut taxes to save the city!" lecture, I can read the Detroit News editorial page. Tell us what services should be cut or eliminated to reduce the overall cost of city government that would allow for a reduction in the city income or property taxes. It's basic math, the city has high property tax rates because its property tax values are a fraction of what they are in the suburbs, the city has to provide services that few or no suburbs provide and large numbers of its residents live in or near the poverty line. Here's a resolution for 2011 - stop writing editorials that identify the problem. Everyone knows what the problems are that the city faces. Start writing editorials that suggest real solutions, not stupid schemes like Newt Gingrich's "tax-free zone".

[Patrick]

But what are the real solutions? How can Detroit attract people to move within its city limits? What kind of incentives can it use to attract business that haven't already beeen used?

[ja!mz]

I think we should try the crack free zone...uh...er....I mean the tax free zone...

[iheartthed]

Why would cutting taxes be more important than improving services?

[English]

No one moves into a major metropolis for cheaper taxes or the best schools. That is what the suburbs and exurbs were created for. They move for the cultural and social amenities.

And as far as shoddy city services are concerned, ours are at the bottom of the heap, to be sure, but I have yet to meet a working or middle class resident of any major city at or near a million or more who doesn't complain about services, schools, and in a few other places, crime.

[Kevgoblue]

The high tax rate can be easily defrayed by the low housing costs.
The city needs a few things. Better police response and at least a few more "succeeding" schools. But the biggest missing link is employers. Its hard to justify living in the city with substandard services, if you still have to drive to Novi or Auburn Hills to go to work.

The lack of meaningful employment shorts the city on tax revenue, middle class families and desireablity.

[Richard]

How about offering a free derelict house to someone that is willing to move tax free for two years must homestead with the option of free rein to salvage houses that are slated for demo for recycling materials to be used in the rebuilding of the house.

Short term = Occupancy of homes that have little or no value any ways,brings residents into the community with pride,saves demo costs on the unsalvageable ones etc.
Little or no costs out of the cities pocket other then administrative costs and maybe even form a group of said potential owners to help each other in the rebuilding process ,kinda like the Habitat formula.

Long term = Rebuilt neighborhoods and a bigger tax base.

Just a thought.

[Fnemecek]

Hey Henderson, how about telling us how you think this can be achieved?

It's simple: hire people who know what they're doing.

Tell us what services should be cut or eliminated to reduce the overall cost of city government that would allow for a reduction in the city income or property taxes. It's basic math, the city has high property tax rates because its property tax values are a fraction of what they are in the suburbs, the city has to provide services that few or no suburbs provide and large numbers of its residents live in or near the poverty line.

When someone argues that we need to cut or eliminate services in order to cut taxes, or that the problem is our underlying property values, it simply shows that they don't know what they're talking about. Let's look at the facts.

According to Forbes magazine, the average American pays $1,183 in property taxes. Most Detroiters are paying somewhere in the neighborhood of $2,000 in property taxes. On top of that, we pay a city income tax and a utility tax that most other cities don't pay.

In raw dollar amounts - regardless of the value of our property or anything else - the City of Detroit has more money coming in today than any other community our size. In spite of that, we can't get the most basic of services on a consistent basis.

Communities that are led by people who know what they're doing get results.

[davewindsor]

Tell us what services should be cut or eliminated to reduce the overall cost of city government that would allow for a reduction in the city income or property taxes. It's basic math, the city has high property tax rates because its property tax values are a fraction of what they are in the suburbs, the city has to provide services that few or no suburbs provide and large numbers of its residents live in or near the poverty line.

And yet a lot of these problems could be solved by the governor stepping in and amalgamating the city and the county into a Detroit supercity like Los Angeles so everybody pays their fair share. City of Detroit = 143 square miles. City of Los Angeles = 469.1 square miles.

[ja!mz]

I dont know where Forbes gets their numbers, the last time my property was 2k was 15 years ago in eastponte...most people in the suburbs pay about 3k and that the low side look at propery taxes in GP about 5-6 k

[Lowell]

Solution no. 1 - Levelize City of Detroit insurance rates down to the metropolitan average. For most Detroiters and other Inner city dwellers that de facto tax cost far more than the higher tax rates. It is unfair and extortionate and levelization would do more to encourage people to move and stay in our troubled cities than any other incentive.

[sehender1]

Hey Henderson, how about telling us how you think this can be achieved? If I want to read the "cut taxes to save the city!" lecture, I can read the Detroit News editorial page. Tell us what services should be cut or eliminated to reduce the overall cost of city government that would allow for a reduction in the city income or property taxes. It's basic math, the city has high property tax rates because its property tax values are a fraction of what they are in the suburbs, the city has to provide services that few or no suburbs provide and large numbers of its residents live in or near the poverty line. Here's a resolution for 2011 - stop writing editorials that identify the problem. Everyone knows what the problems are that the city faces. Start writing editorials that suggest real solutions, not stupid schemes like Newt Gingrich's "tax-free zone".

Novine, this was the first shot at this: lay out the problem. Gotta start there, sorry..
Solutions are coming - both from me and others.. the chamber's recommendations early this year promise to be quite interesting..

Likely next topic for me is how to pay for outright tax reductions - something I've spent some time thinking about and researching. But I can't do everything in one column.. Did you not see the line that said we would be dedicated to these issues all year???
Also a request: Can we stop the accusatory missives from you? Seriously, not helpful.. and quite annoying....

[skyl4rk]

Not only are Detroiters paying too much in taxes, but many of the people in Michigan believe that too much of their state taxes are going to Detroit.

[Novine]

"this was the first shot at this: lay out the problem. Gotta start there, sorry.."

We all know the problem - Detroit residents and businesses pay way more in taxes for sub-standard services as compared to what they could get for their tax dollars in many of the suburbs. I'm not sure who among your audience is unfamiliar with this. If this was the first time this had been discussed on the pages of the Freep, you might get a pass. But how many editorials do we have to read about the decline of Detroit and Michigan that tell us "we need to fix things" and never propose real solutions? Daniel Howes has made it a specialty of his over on the Detroit News churning out column after column about the sad state of Michigan and the need for "change" but never offering up anything more than "cut taxes" and "reduce regulations". High school debaters can crank out more specifics than a typical Detroit newspaper editorialist.

"Likely next topic for me is how to pay for outright tax reductions - something I've spent some time thinking about and researching."

Good! About time someone put some specifics on paper. This was a beef I had with your coverage of the campaign for governor. You allowed Rick Snyder to get away with going on about the need for change without ever backing it up with specifics. Even when Synder gave some specifics, like replacing the MBT with a corporate income tax, he was never forced to provide details of how he was going to accomplish that or how he would make up the loss of revenue to the state budget. Contrary to how politicians like to portray it, neither the state budget or the city budget are excessively complex. Anyone serious about budgeting, including a self-described nerd, should be able to figure it out and provide specific details on how they are going to raise X amount of dollars to fund a budget of Y dollars in size. Snyder has taken office and we still don't have any specifics and so far, the editorial pages of the major papers are giving Snyder a pass instead of asking him to start putting to paper what he's going to do that will affect all of us in the state.

"Can we stop the accusatory missives from you? Seriously, not helpful.. and quite annoying...."

Accusatory? What accusations am I making? I'm only telling you that this reader is tired of reading the same-old, same-old, "Houston, we have a problem" editorials from the Detroit media types. Anyone who's paying attention gets that we have a serious problem. Let's start talking about solutions on how to fix them.

[NorthEndere]

Not specifically Detroit related, but I thought Michigan could really throw a bone out to businesses in particular by simply ridding us of our state's personal property tax, which is essentially a business tax on top of the existing business tax. It'd put a relatively meager hole in state revenue [[though, there is some debate to how it'd effect municipalities which can levy their own PPT), but put us in line with states like Illinois, New York, and Pennsylvania that while generally considered high tax, don't have the PPT, but spread out their tax burden. I'm also in favor of scrapping the MBT, but also spreading the sales tax to services and going with a graduated income tax. For me, as a general liberal, I don't think the problem is so much the amount of taxes, but where and how we pay them [[i.e. on the front end, back end, somewhere in between, or a little of all three). I think we can keep a relatively high amount and quality of services, but more effectively spread the burden, so we won't have to keep putting all of our eggs in less than a few baskets.

[Lowell]

I'm only telling you that this reader is tired of reading the same-old, same-old, "Houston, we have a problem" editorials from the Detroit media types. Anyone who's paying attention gets that we have a serious problem. Let's start talking about solutions on how to fix them.

So fire away. What are the solutions as you see them?

My sense is that we are at the limit of what how much we can cut back on revenues for schools and vital services without risking serious and permanent damage. In other words what ever revenue is cut in one place has to be made up elsewhere. That is why I am pumping insurance reform and other non-tax based solutions.

[szla]

There is metropolitan government. And then there is selling the water department to either a metropolitan authority or a private company. My choice is the metropolitan authority for 4-5 billion, amortize the payments over 10-12 years which should give the city about 12 years to get its house in order. You could reduce the the income tax to 1 percent and 1/2 percent, a very reasonable rate for a central city and seriously curtail the property tax rate. It would provide serious breathing room. The suburbs seem intent on either taking over by proxy or grabbing in whole the water system anyway. You might as well get something for it rather than loose it. The latest Kwame revelations relative to theft with water and sewage seem to only add to the fuel to the fire.

[NorthEndere]

DWSD isn't going anywhere anytime soon in its current form. Even under the the most amiable of circumstances, this would involve the courts, which would take years and millions of dollars that neither the city nor the suburbs have to spend, right now, in court fees. We can really stop talking about DWSD as any kind of pawn or solution to the budget, for the forseeable future.

[sehender1]

We all know the problem - Detroit residents and businesses pay way more in taxes for sub-standard services as compared to what they could get for their tax dollars in many of the suburbs. I'm not sure who among your audience is unfamiliar with this. If this was the first time this had been discussed on the pages of the Freep, you might get a pass. But how many editorials do we have to read about the decline of Detroit and Michigan that tell us "we need to fix things" and never propose real solutions?"

We may all "know the problem," but one of the reasons things don't get fixed is that there isn't a focus on specific problems, placed in context, and discussed through to solutions.
we have never looked as specifically at the city's tax burden as we began doing today... And we won't have proposed the solutions I intend for us to endorse...
That's what we're trying to do with this work this year. Sorry if you feel like it's treading old ground; it won't be once we're talking about concrete ways the tax burden might be lightened, or how the city's unproductive land might be repurposed, or the whole list..

I love that you are looking to the ed pages for solutions - but I'd caution a little patience.. all of this stuff is complicated, and it will require a pretty methodical approach. Even then, I can't guarantee that I'll come up with some magic bullet solution to any of it.. Just trying to come up with ways to get people discussing these things specifically, and thinking about what to do!

[Fnemecek]

I dont know where Forbes gets their numbers, the last time my property was 2k was 15 years ago in eastponte...most people in the suburbs pay about 3k and that the low side look at propery taxes in GP about 5-6 k

The Forbes numbers come from a survey of what every municipality in the United States collects in property taxes.

I'd like to know where you get the idea that "most people in the suburbs pay about 3k". I have relatives in Dearborn, Westland, and elsewhere in suburban Detroit. None of them pay $3,000 in property taxes.

[sehender1]

Solution no. 1 - Levelize City of Detroit insurance rates down to the metropolitan average. For most Detroiters and other Inner city dwellers that de facto tax cost far more than the higher tax rates. It is unfair and extortionate and levelization would do more to encourage people to move and stay in our troubled cities than any other incentive.

Lowell: this is a great idea... not an easy one to pursue, to be sure, but one that will have to be on the table if we're going to make the choice about living in the city "competitive," as I called it in the column today..

[NorthEndere]

Getting the insurance rates -- which are unusually high even for the risks of Detroit -- lowered is DOA. It had little support even with a Democratic governor and a Democratic House; this won't even get a hearing, now, in this new tea-flavored Republican legislature, who are ironically owned by the insurance industry, of course. And, taking this directly to the insurance companies obviously haven't worked.

[milesdriven]

I bought my house in Toledo for $89K back in 2008, and pay around $1700/year in property taxes with a homestead exemption. How much would I pay on a comparable house in the CoD?

[Fnemecek]

With homestead, you're looking at $2,928 in annual property taxes and fees for a house that's worth $89,000.

The taxable value would be $44,500 x 65.79 mills + solid waste fee = $2,928.