Detroit must jettison its losing tax scheme

[Wesley Mouch]

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.

This is a great idea.

Alternative: Charge suburban areas a tax to cover the development cost of the roads and sewers required to sprawl. I'm OK with sprawl, but not so OK with paying for M59 to make it easier. Road upgrades for traffic should be locally borne. If you're in Detroit [[or inner-ring) the roads are already built.

[fryar]

The insurance rates are unusually high, given the risks of Detroit? Shouldn't this basically not be possible, given competition among insurers?

I do remember some talk a few years back of trying to get car insurance rates lowered. How is this supposed to be accomplished?

[Lowell]

Insurance discrimination, particularly automotive, places a double whammy on Detroit and other insurance-disadvantaged cities. In many cases it deprives low-income working people of transportation. 30% of Detroit households are carless and are thereby deprived job and bargain shopping that a car can enable. They might be able to buy a car but they can't afford the insurance. Others pay a month of insurance to get papers then drop out and drive uninsured. Just like the use of emergency rooms for the health uninsured, when they have an accident we all pay for it.

It also affects the population count of high price areas as many will obtain address credentials for a lower rate area, say at a relative's house, and, in turn, have their census taken there.

Insurance companies hide behind a maze of red lines that are used to justify higher rates for everybody and confuse the buyers. Why are they allowed to arbitrarily carve the state up into pieces? Why isn't the the whole state one rate district? Because it is a divide and conquer policy. By charging the older inner city areas ultra high rates they can charge everybody more. "A rising tide lifts all ships" as the old saying goes.

These rates also hurts "Detroit" in the sense of automakers. The more of the total car dollar that goes into insurance means less is left over for buying a car or buying an more expensive model.

Rates should be based only on driving records, capability of drivers and statewide risk [I would prefer national averages but that kind of regulation is constitutionally impossible]. Where someone drives or parks should be factored out because there is no way to control the risks drivers may take. E.g. the suburban kid driving in to buy drugs or go to underground parties in high crime areas. Meanwhile a city dweller may, due to a job, relatives and shopping habit may have his or her car in a low risk area most of the time.

[Lowell]

Regarding the city income taxes, they carry an additional tax in that if one gets their taxes done at a tax service,they must pay a charge for it, that can cost more than the actual tax in the case of low wage earners. If anything it is an added annoyance not shared by others in the metro.

It also open citizens to exploitation by corrupt city officials [not that there are any of those lol] to look into the tax records of enemies and businesses. In the case of business owners and the self employed they are required to attach their Schedule C or other forms that detail the income and expenditures which can be highly revealing to competitors.

It is bad enough that this has to be surrendered to the Feds.

For those reasons, removing the income tax should be the first target of any tax removal / reallocation.

[Chuck La Chez]

In the case of business owners and the self employed they are required to attach their Schedule C or other forms that detail the income and expenditures

That is unbelievable.

Thank you.

[Blue]

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



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.

Very good comprehension of the facts that most people like to overlook!
Usually everyone just says "Detroit has no money". it is never discussed that Detroit actually does have quiet some money coming in every year.
This is the first time someone brings it to a short and well researched point. Bravo.
the question is: what are the people going to do about this now?
there will be no revolution as long as everyone is drooling over their own remote control. if someone has a good plan - i am in.

[mwilbert]

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.

This really isn't true. First, just because a property in Detroit has a higher tax bill than the US average doesn't mean it is higher than the average US city its size. Second, some of those taxes go to the county. Third, there is a large additional category of taxes, commercial property taxes.

To make this concrete, Detroit's total tax revenue from the FY10 budget was about $750 million [[$650 million or so to general fund, a bit less than $100 million for the schools). That includes property and income taxes. By comparison, Boston has no income tax, and is significantly smaller [[less than 600K people, 41 square miles) and raised $1.4 billion from property taxes. Of course both Detroit and Boston get revenue from other sources as well, but the bottom line is that Boston has much more money to spend on city services than Detroit does.

[Fnemecek]

This really isn't true. First, just because a property in Detroit has a higher tax bill than the US average doesn't mean it is higher than the average US city its size. Second, some of those taxes go to the county. Third, there is a large additional category of taxes, commercial property taxes.

#1. Detroit's property taxes are much higher than other cities our size as well. Regardless of whether the comparison is cities in general or cities our size, Detroit imposes a tax burden that is significantly higher than average.

#2. Yes, a portion of our property taxes go the county. The same is true with every other city.

Regardless, taxes to the county are small portion of the overall burden. For most properties, Wayne County's burden is only $300 - $400. If you back that out of the approx. $2,000 that most Detroiters pay, you're left with a property tax burden of $1,700 which is still considerably higher than the $1,183 average for all cities.

And that $1,183 average is a combined city + county + schools number.

#3. For commercial properties, the tax rate is even higher still.

To make this concrete, Detroit's total tax revenue from the FY10 budget was about $750 million [[$650 million or so to general fund, a bit less than $100 million for the schools). That includes property and income taxes. By comparison, Boston has no income tax, and is significantly smaller [[less than 600K people, 41 square miles) and raised $1.4 billion from property taxes. Of course both Detroit and Boston get revenue from other sources as well, but the bottom line is that Boston has much more money to spend on city services than Detroit does.

Detroit's total tax revenue was only $750 million? Whose ass did you pull that number out of?

The City of Detroit's general fund budget for FY 2011 is $2.9 billion.

http://www.detroitmi.gov/Portals/0/d...ef%2010-11.pdf

FY 2010 general fund is no longer on-line. However, I recall that is was fairly close to FY 2011.

[Fnemecek]

Very good comprehension of the facts that most people like to overlook!
Usually everyone just says "Detroit has no money". it is never discussed that Detroit actually does have quiet some money coming in every year.
This is the first time someone brings it to a short and well researched point. Bravo.

Thanks, Blue.

the question is: what are the people going to do about this now?
there will be no revolution as long as everyone is drooling over their own remote control. if someone has a good plan - i am in.

For me, it's just a matter of constantly reminding people of the truth. The Detroit Police Department has a budget - on a per resident basis - that is roughly 30% larger than average. In spite of having more money than any other police department, DPD still can't get an officer to show up when we need them.

If anyone else has another actionable idea, I'd love to hear it.

[Locke09]

Detroit's FY 2010/11 budget is 2.9 billion, but that includes both general and enterprise funds.

Taxes [[Property, Income, Casino Wagering and Utility Users Excise Tax) account for approximately 27% of the total revenue for that budget - about 772 million. Of that 772 million, only 220 million is from property tax [[7.54% of total revenue). Note: The City expects to bill 257 million, but only collect 220 million bc of delinquencies and adjustments. 215 million is projected from Income Tax [[7.39%). So the City projects 435 million from property and income tax, approximately 15% of total revenues, 25% if you exclude the enterprise fund revenue.

Of the approximately 83 mills the City residents pay for property tax [[less for homestead properties), only 20 mills go towards City operations. The rest goes to Wayne County [[14% including summer and winter taxes), Schools and education [[37% including school bond debt) libraries [[5%) and debt [[7%).

So, what would be a significant reduction in property taxes, for instance? 10%? The entire 10% would have to come out of the City's portion for operating [[unless Wayne County is going to give up some of its portion or the State is going to ask for less for the schools or we are going to default on some debt bond obligations). The City would therefore lose 40% of its property tax revenue [[about 8 mills) to save us about 10% on our taxes.

[iheartthed]

Detroit's FY 2010/11 budget is 2.9 billion, but that includes both general and enterprise funds.

Taxes [[Property, Income, Casino Wagering and Utility Users Excise Tax) account for approximately 27% of the total revenue for that budget - about 772 million. Of that 772 million, only 220 million is from property tax [[7.54% of total revenue). Note: The City expects to bill 257 million, but only collect 220 million bc of delinquencies and adjustments. 215 million is projected from Income Tax [[7.39%). So the City projects 435 million from property and income tax, approximately 15% of total revenues, 25% if you exclude the enterprise fund revenue.

Of the approximately 83 mills the City residents pay for property tax [[less for homestead properties), only 20 mills go towards City operations. The rest goes to Wayne County [[14% including summer and winter taxes), Schools and education [[37% including school bond debt) libraries [[5%) and debt [[7%).

So, what would be a significant reduction in property taxes, for instance? 10%? The entire 10% would have to come out of the City's portion for operating [[unless Wayne County is going to give up some of its portion or the State is going to ask for less for the schools or we are going to default on some debt bond obligations). The City would therefore lose 40% of its property tax revenue [[about 8 mills) to save us about 10% on our taxes.

What services does Wayne County cover that the city does not pay? [[That would require a tax of 12 mills -- is that correct?) The sheriffs department is basically redundant. The court system? Roads? Anything else?

[Locke09]

What services does Wayne County cover that the city does not pay? [[That would require a tax of 12 mills -- is that correct?) The sheriffs department is basically redundant. The court system? Roads? Anything else?

Wayne County Jail
County Parks
Wayne County Community College
and almost 6 mills for Wayne County Operating expenses [[don't know what those are)

Total of about 14 mills in 2009

[sehender1]

Detroit's FY 2010/11 budget is 2.9 billion, but that includes both general and enterprise funds.

Taxes [[Property, Income, Casino Wagering and Utility Users Excise Tax) account for approximately 27% of the total revenue for that budget - about 772 million. Of that 772 million, only 220 million is from property tax [[7.54% of total revenue). Note: The City expects to bill 257 million, but only collect 220 million bc of delinquencies and adjustments. 215 million is projected from Income Tax [[7.39%). So the City projects 435 million from property and income tax, approximately 15% of total revenues, 25% if you exclude the enterprise fund revenue.

Of the approximately 83 mills the City residents pay for property tax [[less for homestead properties), only 20 mills go towards City operations. The rest goes to Wayne County [[14% including summer and winter taxes), Schools and education [[37% including school bond debt) libraries [[5%) and debt [[7%).

So, what would be a significant reduction in property taxes, for instance? 10%? The entire 10% would have to come out of the City's portion for operating [[unless Wayne County is going to give up some of its portion or the State is going to ask for less for the schools or we are going to default on some debt bond obligations). The City would therefore lose 40% of its property tax revenue [[about 8 mills) to save us about 10% on our taxes.

Locke, you've put your finger on one of the seriously complicating factors here... it will be very difficult to change one thing in the city's tax structure and make a difference, because you have so many different taxing authorities levying against t he city's taxbase.
It does really make the argument that maybe you start with something symbolic, rather than substantive, like the income tax. You'd only get 2.5 percent reduction for city residents, but it would send a strong message about wanting to reduce the overall burden..
of course, tghe challenge would be to make up the $312 million in lost revenue. I'll likely be tackling that question specifically in the next column on this subject, in a few weeks..

[citylover]

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.

You are being less than honest.Detroit has no where near a million people anymore. And From what I read here frequently city services in Detroit including police response time is spotty at best and horrendous often. Unfortunately Detroit is perhaps much worse then other comparable cities.

[iheartthed]

You are being less than honest.Detroit has no where near a million people anymore. And From what I read here frequently city services in Detroit including police response time is spotty at best and horrendous often. Unfortunately Detroit is perhaps much worse then other comparable cities.

Having +90% of a million isn't nearly 1 million? If I had more than $900,000 in my account that wouldn't be nearly $1M?

[Crumbled_pavement]

Locke, you've put your finger on one of the seriously complicating factors here... it will be very difficult to change one thing in the city's tax structure and make a difference, because you have so many different taxing authorities levying against t he city's taxbase.
It does really make the argument that maybe you start with something symbolic, rather than substantive, like the income tax. You'd only get 2.5 percent reduction for city residents, but it would send a strong message about wanting to reduce the overall burden..
of course, tghe challenge would be to make up the $312 million in lost revenue. I'll likely be tackling that question specifically in the next column on this subject, in a few weeks..

One thing that could be tremendously helpful would be simplifying the taxing system by having less authorities taxing the residents. That may take the state to restructure some things but I think it would make it easier to see who's being taxed, how much, and where the taxes are going to. The city also needs are a far better accounting system. IIRC, the city has poor accounting practices. These things would make it far easier to begin the process of lowering taxes.

[citylover]

Having +90% of a million isn't nearly 1 million? If I had more than $900,000 in my account that wouldn't be nearly $1M?

That is our disagreement.Yes if you had 900thou it would be close to a million........Detroit has no where near 900,000

[NorthEndere]

Locke, you've put your finger on one of the seriously complicating factors here... it will be very difficult to change one thing in the city's tax structure and make a difference, because you have so many different taxing authorities levying against t he city's taxbase.
It does really make the argument that maybe you start with something symbolic, rather than substantive, like the income tax. You'd only get 2.5 percent reduction for city residents, but it would send a strong message about wanting to reduce the overall burden..
of course, tghe challenge would be to make up the $312 million in lost revenue. I'll likely be tackling that question specifically in the next column on this subject, in a few weeks..

You know, it'll never happen, but with the city and out-county areas having become so different economcally and socially, and services now so duplicate, that I don't think it at all be that difficult to make Detroit an independent city along the lines of Baltimore or St. Louis or like the cities of the state of Virginia which are ALL independent of their counties.

[mwilbert]

The City of Detroit's general fund budget for FY 2011 is $2.9 billion.

That number has little to do with the city's tax revenues. It includes water and sewer charges, bus revenues, revenues from the state, and a whole bunch of other stuff. Look at the top pie chart on the page you referred to. How much of that revenue is from municipal taxes--eyeballing it, I'd say around a quarter. 2.9 billion /4 = 725 million.

I understand that you think the city isn't using its money effectively. No doubt that is true, but it doesn't have the money you think it does.

[trstar]

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.

sssshhhhh. Nobody wants to hear how Detroit insurance rates are red lined and subsidizing the surrounding communities.

[lincoln8740]

sssshhhhh. Nobody wants to hear how Detroit insurance rates are red lined and subsidizing the surrounding communities.

Now that is funny. Yes I am sure that Detroit's insurance rates have nothing to do with the crime level in the city. It's those damn suburbs taking the hard earned money out of Detroiter's pockets!!