No tax zone for Detroit?

**Russix** · June-05-10, 01:01 AM

Originally Posted by 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.

That guy selling $1 square inches parcels of Detroit in Loveland would make about $306,055,280 overnite!

**Huggybear** · June-06-10, 08:48 AM

Originally Posted by 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.

This is right - the idea that Detroit would have no taxes to support services is a canard. Detroit's taxes might be allowed to temporarily rise [[even as high as, say, 5%) so that the city can improve police/fire coverage, balance the budget, fix the infrastructure, pay off bonds, and clean up development sites. The trick would be putting in sufficient controls to prevent the city's structural costs from increasing in a way that cannot be scaled back immediately when the tax rate goes down.

On the issue of geography, I wouldn't count on a "downtown-plus-midtown" [[or any "-town") area. For a bunch of reasons, it's CBD, everything, or nothing. The CBD is an easier sell to the feds because it is one square mile. It's sell-able to Detroiters because it can be labeled everyone's neighborhood. The whole city is an easy sell politically [[locally) and has enough land to support the type of capital investment to make things better. But any "in-between" area that has a significant residential population is "someone's neighborhood" and political suicide to favor.

And on duration, 10 years will pass in the blink of an eye. Make it index to the median income or something.

**ghettopalmetto** · June-06-10, 10:19 AM

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.

**Novine** · June-06-10, 10:58 AM

"This is right - the idea that Detroit would have no taxes to support services is a canard."

More fantasy world talk. Detroit gets about $500 million of its revenue from city property taxes, income tax and utility tax. Those are direct tax payments to the city. Where does this money come from if Detroit is transformed into a tax-free zone? The State? The state has been cutting state revenue sharing for years. If the state can't afford to cover revenue sharing for local communities, where is it going to find another $500 million dollars? If we assume that it operates like the Renaissance Zone, it would also result in the state losing hundreds of millions [[or more) in additional revenue through the abatement of the state education tax [[6 mills on property) and state income tax payments. In this fantasy world, cash strapped communities across the state are going to come up with more revenue or get less money for cities and schools so that Detroit can be a tax-free zone? I don't think so.

**Huggybear** · June-06-10, 12:09 PM

In what I was discussing, the city kept its taxes - and increased them [[did you even read past that phrase?). It was the other taxes [[primarily federal) that went away. Holy strawman, Batman.

Originally Posted by Novine

"This is right - the idea that Detroit would have no taxes to support services is a canard."

More fantasy world talk. Detroit gets about $500 million of its revenue from city property taxes, income tax and utility tax. Those are direct tax payments to the city. Where does this money come from if Detroit is transformed into a tax-free zone? The State? The state has been cutting state revenue sharing for years. If the state can't afford to cover revenue sharing for local communities, where is it going to find another $500 million dollars? If we assume that it operates like the Renaissance Zone, it would also result in the state losing hundreds of millions [[or more) in additional revenue through the abatement of the state education tax [[6 mills on property) and state income tax payments. In this fantasy world, cash strapped communities across the state are going to come up with more revenue or get less money for cities and schools so that Detroit can be a tax-free zone? I don't think so.

**Novine** · June-06-10, 12:23 PM

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** · June-06-10, 12:32 PM

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.

Originally Posted by ghettopalmetto

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.

**Huggybear** · June-06-10, 12:48 PM

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.

Originally Posted by 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.

**ghettopalmetto** · June-06-10, 01:38 PM

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?

**Jimaz** · June-06-10, 02:27 PM

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** · June-06-10, 04:00 PM

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*

Originally Posted by 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?

**royce** · June-06-10, 04:43 PM

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** · June-06-10, 06:27 PM

"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.

**Hermod** · June-06-10, 07:01 PM

The only ones that can "afford" to give Detroit a tax break are the feds [[they own the printing press). Gingrich suggested treating Detroit like Puerto Rico [[free of fed income tax) for ten years. That would be a powerful incentive for people to move into Detroit [[even if they have to build Kibbutzes with barbed wire and gun towers). After ten years, they might all leave or if they solved the city's problems by the massive influx of the well to do taking political control, they might decide to stay.

**iheartthed** · June-06-10, 07:08 PM

Originally Posted by 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?

Speaking fees.

**Novine** · June-06-10, 09:29 PM

"Speaking fees."

Exactly. If the Detroit Chamber wants to do something "bold", they should put their efforts and energy into re-writing the Michigan Business Tax. The business interests in this state got a golden opportunity in 2007 to start from scratch with the state's main business tax. They botched it. Instead of chasing unicorns and ponies, work on something that might actually get changed and could have a positive effect on the state's economy.

**fryar** · June-06-10, 10:55 PM

I hadn't realized...was Newt Gingrich talking about the federal income tax? That would make a huge difference.

And don't weep for the suburbs, they'll be fine if Detroit prospers, this isn't us-vs-them.

DetroitDad · June-06-10, 11:53 PM

Why is it that I am penalized with a higher city income tax for living in Detroit, while my coworkers in suburbia are rewarded with less taxes? Shouldn't that be the other way around, considering they require parking [[I walk or take transit) and use the raods and freeways more? Likewise, I spend my entire paycheck in the city... they spend little to nothing when it comes to day to day expenses.

Even more frustrating is the transit fares. Why do I have to pay the same amount to go one mile up the road, while the suburbanites pay the same to go eight miles or more?

Now, I really have nothing against them in this case. You want to live or build in our outer regions, fine. But they should be paying for the negative impacts they have on our society.

**Gistok** · June-06-10, 11:54 PM

Originally Posted by Hermod

The only ones that can "afford" to give Detroit a tax break are the feds [[they own the printing press). Gingrich suggested treating Detroit like Puerto Rico [[free of fed income tax) for ten years. That would be a powerful incentive for people to move into Detroit [[even if they have to build Kibbutzes with barbed wire and gun towers). After ten years, they might all leave or if they solved the city's problems by the massive influx of the well to do taking political control, they might decide to stay.

I can't think of a faster way for well to do folks to move to Detroit than having "no federal income taxes" for 10 years. But then there's the flip side of that equation... Puerto Rico is an island... and everyone lived on the island. Detroit is not an island, but surrounded by suburbs. Buy a house in East English Village as your primary residence for a fraction of what they were selling for 10 years ago... and keep your villa in Grosse Pointe and Bloomfield Hills as a secondary or "weekend" home.

There would have to be some pretty strict safeguards against this scenario, otherwise it'll be like in the pre-1990s days when some city workers [[who reqiured residency in the city) had a 2nd home in suburbs/exurbs that they spent much of their time at.

**CLAUDE G** · June-07-10, 12:38 AM

#1 As a business owner in Detroit, I can tell you the city really doesn't provide any services anyways, unless you count inspectors that come around and write tickets.

#2 As far as Tax free zones, there is thousands of acres of land in Detroit that are vacant. I would much rather see that land zoned tax free and see economic growth, instead of it sitting there vacant not generating any revenue at all.

So you give a business 10 years before you start collecting taxes, if other homes and business grow around it, then you aint gonna see anyone flee when the tax break is over/

Michigan · June-07-10, 07:39 AM

Why not a rent free zone? Why doesn't the city mandate space that has been vacant for over 2 years be made available rent free to start up businesses for 2 years. The city and state would subsidize the buildings maintenance. This would create a giant city wide incubator.

DC48080 · June-07-10, 07:55 AM

Originally Posted by Michigan

Why not a rent free zone? Why doesn't the city mandate space that has been vacant for over 2 years be made available rent free to start up businesses for 2 years. The city and state would subsidize the buildings maintenance. This would create a giant city wide incubator.

Who is going to pay for this? How do you suggest that the city or state finance such a hairbrained idea?

**Hermod** · June-07-10, 07:58 AM

Originally Posted by DetroitDad

Even more frustrating is the transit fares. Why do I have to pay the same amount to go one mile up the road, while the suburbanites pay the same to go eight miles or more?

You can only have differential fares when you control the on-off movement of passengers. Either you need a conductor [[added wages) or the transit has to stop in controlled stations [[ Washington Metro). With buses, you would put the driver in the position of having to remember who got on when and how much he paid. With buses, it is much easier to have a single fare system.

DC48080 · June-07-10, 08:14 AM

Originally Posted by DetroitDad

Why is it that I am penalized with a higher city income tax for living in Detroit, while my coworkers in suburbia are rewarded with less taxes? Shouldn't that be the other way around, considering they require parking [[I walk or take transit) and use the raods and freeways more? Likewise, I spend my entire paycheck in the city... they spend little to nothing when it comes to day to day expenses.

Even more frustrating is the transit fares. Why do I have to pay the same amount to go one mile up the road, while the suburbanites pay the same to go eight miles or more?

Now, I really have nothing against them in this case. You want to live or build in our outer regions, fine. But they should be paying for the negative impacts they have on our society.

Rewarded with less taxes? Are you serious? If non residents had to pay the higher tax rate how long do you think it would be before more and more business moved out of the city? You almost lost GM to Warren because of taxes. I personally would save thousands of dollars a year if my company were not in Detroit.

Also, I pay for parking in Detroit. I pay for gasoline, the cost of which includes very high taxes which are used to pay for the roads upon which I drive and upon which the busses you ride also drive on.

You think non residents spend "little to nothing" in Detroit? I spend $10 or more a day to park in Detroit. I buy lunch in Detroit every day.Dinner too, on many occasions. I often buy gas in Detroit. I go for cocktails after work in Detroit. I go to sporting events and the symphony in Detroit. Would you care to add up and compare monthly Detroit expenditures sometime?

Just what "negative impacts on our society" do those in suburbia cause? Are they bringing disease and pestilence upon society? Are they causing the intellectual meltdown of society?

DetroitDad · June-07-10, 10:09 PM

Originally Posted by DC48080

Rewarded with less taxes? Are you serious? If non residents had to pay the higher tax rate how long do you think it would be before more and more business moved out of the city? You almost lost GM to Warren because of taxes. I personally would save thousands of dollars a year if my company were not in Detroit.

Also, I pay for parking in Detroit. I pay for gasoline, the cost of which includes very high taxes which are used to pay for the roads upon which I drive and upon which the busses you ride also drive on.

You think non residents spend "little to nothing" in Detroit? I spend $10 or more a day to park in Detroit. I buy lunch in Detroit every day.Dinner too, on many occasions. I often buy gas in Detroit. I go for cocktails after work in Detroit. I go to sporting events and the symphony in Detroit. Would you care to add up and compare monthly Detroit expenditures sometime?

Just what "negative impacts on our society" do those in suburbia cause? Are they bringing disease and pestilence upon society? Are they causing the intellectual meltdown of society?

Judging by your post alone...?

All joking aside, you still don't pay your day to day family living expenses in Detroit. You pay a few what... hundred dollars a month, if that? With all do respect, my family pays several thousand, from rent and food, to diapers, to utilities, to entertainment. Sorry, I appreciate you spending a few bucks at lunch at a place that is only open for a few hours [[though not for helping create a "need" for one or more surface parking spots in the city), but there is a huge difference between working/visiting and holding a residence here.

Anyway, you might be right about chasing away business, but I still argue that it doesn't seem fair that I get penalized for living and working in the city, while former residents get rewarded for moving away to suburbia, and neglecting their responsibilities back home.