Detroit needs to lower taxes if there's any hope of a comeback (Troy: real estate market, crime)

[Mayorofsynsky]

A modest decrease in taxes won't work. Taxes would still be similar to those charged in the suburbs. Very few people would choose Detroit over the suburbs.

Detroit is bankrupt and unable to offer basic services. Unemployment is 25% because most of the labor base has no marketable skills.

The only solution is to legalize and taxes things that other cities prohibit, such as prostitution, drugs and gambling.

[detwahDJ]

Originally Posted by magellan

Latest discussions have brought to light (to me) that Detroit's property and city income taxes are not only onerous, they're downright unbelievable.

Current millage rate = 67 mills. For those unfamiliar, in Michigan that basically breaks down to 3.35% per year of your market value
Current city income tax rate, resident = 2.45%
Current city income tax rate, non-resident = 1.225%
Corporate income tax rate = 2%

So if you make $60,000/year and own a $200,000 home or condo in Detroit, you pay about $6700/year in property taxes and $1470 a year in city income tax (on top of Michigan income tax and Federal income tax).

Who wants to pay $8170 a year in taxes every year for miniscule services and declining property values, raise your hand? That's $700 a month. You can lease a Jaguar for less than that.

It's estimated that 40% of households in Detroit are delinquent on taxes. I can see why.

Other cities in comparison:

Chicago: 1.79% property tax, no income tax (very high sales tax)
Houston: Appx 1.8% property tax, no state or city income tax
Denver: Appx .6% property tax, no city income tax, high sales tax and a transit tax

I think what Detroit needs to do is institute a gradual reduction of property and income taxes. 10% right now on property taxes (go to 57 mills) and then down another 5 basis points every five years until they get down around 40 mills. That way it doesn't hit the city coffers all at once, but will possibly encourage enough growth to offset the lower rate and put it in the range of other comparable cities.

I also think you'd be more willing to buy property in Detroit if you knew your future property tax rates were actually going to go down. You might have a few sales that would slow just before the next drop, but it would be a blip mainly and pick right up after the step down.

Lower the city income tax to 2%. Drop the non-resident income tax rate. That will encourage even people who don't live in Detroit to possibly work in Detroit or open a business.

I don't always buy into supply side economics, but 67 mills is just a non-starter for anyone with plenty of other places to live.

Thoughts?

Lower taxes is part of the picture, an enticement but imo more is needed to retain residents.
First of all, I don't see residents with mortgages clamoring to move out of their present homes if they can get to jobs, if they believe city services are improving or about to do so, and if they start to gain some optimism for whatever reason, including less fear of crime - to me this is one of the biggies.

Jobs, affordable "targeted" job training, and easy access to jobs will help to keep them in place. This means good mass transit. Lower cost of living overall - including auto insurance, home insurance, taxes. Yes, 3% city tax is hell to pay for poor results, although there used to be a state tax credit for that.
Grand Rapids itself is 1% I believe.

[detwahDJ]

Originally Posted by Mayorofsynsky

A modest decrease in taxes won't work. Taxes would still be similar to those charged in the suburbs. Very few people would choose Detroit over the suburbs.

Detroit is bankrupt and unable to offer basic services. Unemployment is 25% because most of the labor base has no marketable skills.

The only solution is to legalize and taxes things that other cities prohibit, such as prostitution, drugs and gambling.

Agree. This is the European model. The American legislative war on sin and human frailty is a model of ineffectiveness. Legalize, confine, monitor, and tax, while also lowering crime. People pay $$$$$ dearly for this stuff.

[magellan]

Originally Posted by detwahDJ

Lower taxes is part of the picture, an enticement but imo more is needed to retain residents.
First of all, I don't see residents with mortgages clamoring to move out of their present homes if they can get to jobs, if they believe city services are improving or about to do so, and if they start to gain some optimism for whatever reason, including less fear of crime - to me this is one of the biggies.

Jobs, affordable "targeted" job training, and easy access to jobs will help to keep them in place. This means good mass transit. Lower cost of living overall - including auto insurance, home insurance, taxes. Yes, 3% city tax is hell to pay for poor results, although there used to be a state tax credit for that.
Grand Rapids itself is 1% I believe.

Yeah, I believe 1.5%, .75 for non resident workers. People even complain about that!

Property taxes are between 31 - 36 mills depending on the school district. But GR still has problems attracting and retaining middle class families because of the poorly performing schools at GRPS. There's a huge push to change that, we'll see. But at least population is relatively steady, which is remarkable for a snowbelt Midwestern city.

[Retroit]

Originally Posted by detwahDJ

I don't see residents with mortgages clamoring to move out of their present homes if they can get to jobs, if they believe city services are improving or about to do so, and if they start to gain some optimism for whatever reason, including less fear of crime

That's true, but what about those without mortgages? Half (47.4%*) of Detroiters don't own a home.

* Detroit (city) QuickFacts from the US Census Bureau

[Indentured Servant]

I guess I am just of a different opinion…..as I already see Detroit as “coming back”. The rate of reverse acceleration has slowed and in five years’ time will reach a slight forward acceleration baring a severe national economic downturn. I think one has to look at all the factors that ultimately drove people out of Detroit, over the last 40 years. Those factors have changed significantly. It’s really a new era.

Look at the South. The south was considered a backwards area with poor schools and many social problems. What it had going for it was the weather and its low cost. Eventually, that is where the investment went. Detroit might not have the weather but it definitely has the low cost. Capital seeks the path of least resistance to profits and since property is cheap and unions have been decimated and with such a large potential pool of cheap labor, investment will come to Detroit. Detroit will never again be like the Detroit of old, with high paying jobs and the like, but it will become a new low wage area…..which is really the fate of the nation as a whole as the Middle Class shrinks.

If not for the near collapse of the auto industry last decade, part and parcel with the near collapse of the US economy, as well as the housing fiasco.......Detroit's population would have stabilized at about 850,000 people. I actually see the bankruptcy as something needed and healthy in the long run that will allow the city, in the long run, to improve faster.

Taxes will go down when property values go up as the result of increased demand.

[michigan83]

I think, just from a logical standpoint, that the property taxes in Detroit have to come down. Compared to the services that you get in return, the tax rates in Detroit seem like price gouging. If Detroit was an oil company there would probably be an investigation of some sort. Especially when you consider that many property owners couldn't sell their property to escape the taxes even if they wanted to. It's almost like a prison sentence to property tax hell.

[Mayorofsynsky]

Everyone keeps focusing on whether the property taxes are fair for the services provided. That's irrelevant if you want to lower taxes because the city is bankrupt. Detroit can't lower taxes because they owe too much from obligations they already incurred. Bankruptcy can help alleviate some of that, but not everything particularly if people want union pensioners to receive their full benefits.

Get it while you can!

[michigan83]

Originally Posted by Mayorofsynsky

Everyone keeps focusing on whether the property taxes are fair for the services provided. That's irrelevant if you want to lower taxes because the city is bankrupt. Detroit can't lower taxes because they owe too much from obligations they already incurred. Bankruptcy can help alleviate some of that, but not everything particularly if people want union pensioners to receive their full benefits.

Get it while you can!

Another way of looking at it, from a long term perspective, is that Detroit can't afford NOT to lower taxes. You have to think about future revenue that is lost due to onerous taxes. Short term pain = long term health. Actually, I read somewhere that lost revenue from lowering taxes right now would basically have no bearing whatsoever on the current bankruptcy. That ship has sailed. I remember reading that in an article about the current mayor's statement that Detroit would lower property tax assessments by 5-20%. The article said that the bankruptcy would not prevent that from happening, even though it means less short term revenue.

[Indentured Servant]

Originally Posted by michigan83

Another way of looking at it, from a long term perspective, is that Detroit can't afford NOT to lower taxes. You have to think about future revenue that is lost due to onerous taxes. Short term pain = long term health. Actually, I read somewhere that lost revenue from lowering taxes right now would basically have no bearing whatsoever on the current bankruptcy. That ship has sailed. I remember reading that in an article about the current mayor's statement that Detroit would lower property tax assessments by 5-20%. The article said that the bankruptcy would not prevent that from happening, even though it means less short term revenue.

I think the state should step in and help subsidize the city.....since the states image and economy is tied to the fate of Detroit proper. I think if the state usurps the democracy and voting rights of citizens, then it should assume some financial responsibility for that city.