Detroit needs to lower taxes if there's any hope of a comeback (Grand Rapids: rent, loans)
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Properties in Detroit are worthless; therefore, mils must be much greater than in other cities. That wasn't a typo I meant worthless not worth less.
Bottom line is very few people with money and/or decent earnings potential wants to live in Detroit. Lowering rates to within a few points of suburbs won't help especially if they are still greater than suburbs.
I understand the millage equation very well Mayorofsynsky. My point is that if you lower the rate, you will increase growth which will increase assessed values. You will NEVER increase revenue if you keep raising the rate side of the equation. As someone mentioned earlier, it's a simple Laffer Curve.
Of all the economic principles, I think it's one of the easiest to understand.
And you're wrong, people will live in Detroit. There were somewhere around 4000 building permits issued in the Midtown area in the last 5 or 6 years. But Detroit needs that number to be 40,000 in the next 5 - 10 years. They'll never get there at the current tax rates. 4000 building permits is a drop in the bucket when you're losing 100,000 people every decade.
I understand the millage equation very well Mayorofsynsky. My point is that if you lower the rate, you will increase growth which will increase assessed values. You will NEVER increase revenue if you keep raising the rate side of the equation. As someone mentioned earlier, it's a simple Laffer Curve.
Of all the economic principles, I think it's one of the easiest to understand.
And you're wrong, people will live in Detroit. There were somewhere around 4000 building permits issued in the Midtown area in the last 5 or 6 years. But Detroit needs that number to be 40,000 in the next 5 - 10 years. They'll never get there at the current tax rates. 4000 building permits is a drop in the bucket when you're losing 100,000 people every decade.
Time to balance the equation a bit more.
I've always agreed with you that Detroit cannot raise taxes.
The problem you're not addressing is that Detroit is a horrible place to
live today. It needs a large bailout, probably $25 billion to $50 billion depending on how much it must pay for legacy debt and pensions. That
amount seems like a lot, but it's only $2500 to $5000 per Michigan resident.
Once Detroit gets its bailout and fixes itself, your plan might work. For now population is still declining as shown in the chart below.
Yes that's exactly it! You have to make it easy for companies to get their feet under them. Use whatever progressive scale, but with a cap so as too not run successful businesses out of the city. Right now is Detroit's chance to reset its tax structure. Because that's one of the reasons I have resisted buying/investing up there. Only a strong anchor can afford too domicile there. You need small business and for too long this city like Toledo has only focused on attracting big business instead of putting down roots with real investing and development of small business.
Quote:
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.
I've always agreed with you that Detroit cannot raise taxes.
The problem you're not addressing is that Detroit is a horrible place to
live today. It needs a large bailout, probably $25 billion to $50 billion depending on how much it must pay for legacy debt and pensions. That
amount seems like a lot, but it's only $2500 to $5000 per Michigan resident.
Once Detroit gets its bailout and fixes itself, your plan might work. For now population is still declining as shown in the chart below.
It may be a horrible place to live by most standards, but it's CONVENIENT to a lot of places. If you can make the cost of doing business and the cost of living lower, people will consider it. Keep in mind 75% of households in this country don't have school aged kids, so schools don't necessarily matter to the great majority of people. Security and nearby amenities matter. Low cost of living matters to a lot of people. Being somewhat close to work matters. Getting at least some kind of investment out of your home or condo matters to a lot of people.
There is no other alternative than a plan to revive Detroit in 10 - 20 - 30 - 40 year increments. Michigan cannot let Detroit simply fall off the map. It would never recover from a blow like that.
Therefore, cities like St. Claire Shores, Auburn Hills and Troy are actually closer to jobs. The same is true for nightlife. It's all in the suburbs except for the Red Wings, Lions, Tigers, and a couple museums.
See, this is a train of the thought that's way off but extremely common. I won't disagree that the suburbs have more jobs, but the city of Detroit is where the cultural action is. It's just that people in the suburbs don't really get it yet. They've come around to Slows but don't get why people would want to live in Corktown, or just how much inventive, modern cuisine has taken off there. They crowd One Eyed Betty's in Ferndale when Midtown has at least a half-dozen bars that are just as good, if not better. If anything, downtown Detroit is what's overrated about the city, in comparison to what Midtown, Corktown, and Mexicantown currently offer.
Basically, if you don't get what's going on in Detroit, you're probably the type of person that would live in a far-flung suburb if you lived in Chicagoland, and you'd go to Oak Park or Evanston to get your kicks. But the majority of young people that are movers and shakers understand what's up. They left Royal Oak a decade ago, and were in and out of Ferndale before you knew it was reborn.
Granted, Detroit has a lot of problems. I'm not going to lie about that, even if it has a couple strong entertainment districts and a few resurgent neighborhoods. If we don't go all in to support the good people that are putting their necks on the line to halt the city's decline, and the city DOES fall apart, how do you figure we'll better off for it? Troy and Southfield have been revealed for the shams critics suspected - they suck off culture and wealth but seem incapable of creating anything new, and once that stolen fuel is burned through, you're left with an ugly and declining suburb. Southfield is losing population. Troy's population growth has virtually stopped - want to guess what direction it's about to head in?
Even Dan Gilbert saw the writing on the wall when he moved his money to Detroit. If we're ever going to reinvent this region for the 21st century, it's going to happen in Detroit. Our suburbs are largely unsustainable without strong, continued growth from the core. The overwhelming negative trends in the inner ring suburbs should tell you all you need to know.
Just to finish my thoughts on the importance of Detroit to this region's growth, people don't seem to understand that strong economic cores creating radiating population densities. When you have a strong urban core, the densities gradually slope down the further you move away, creating a relatively stable, circular pattern that gradually fades away. When you have a bunch of weak cores dotted around a large area with no strong core to unite growth, you have the weak cores all creating competing density patterns that makes a mess of development.
So basically, you have a circle of density around Southfield that encourages its own spin off developments. Then you have another similar circle of density around Troy. Eventually, some group in a "suburb" of Southfield/Dearborn - say Farmington/Farmington Hills - tries to create its own economic core, and that creates another, albeit weaker circle with its own spinoff. Now there's "growth" all over that you have to continually pay for, but nothing strong enough to really feed new wealth into its spinoffs. Southfield and Troy simply don't have the economic power, and are busy enough trying to maintain what's been built. It's precarious and everything seems to being decaying after about 20-30 years.
All you have to do is look around at our metro area. We've been siphoning everything off of Detroit, growing out in all directions, while our overall population has basically remained the same. Without a strong core continually feeding into these new developments, how do you suppose we're going to sustain it? You can pretend everything is OK by concentrating the remaining wealth in specific areas, but it's all inevitably to the detriment of another suburb.
Only Detroit has the proper elements in place to create strong growth again. Sure, you could theoretically transition Troy or Southfield into a more tried and true urban model, but the will and money that would take is inconceivable in today's day and age.
I hear what you are saying one is lonely and I'm sure that there is a small segment of the population that would agree with you. But the reality is that most people don't care about an urban core. What they want is to have convenient stores, banks, doctors offices, etc. that are close to where they live. They do not want to drive downtown to hunt for a parking space and they do not want to ride a fancy-shmancy light rail line to get there. They want to be able to walk or drive a few blocks to get their business done.
Just to finish my thoughts on the importance of Detroit to this region's growth, people don't seem to understand that strong economic cores creating radiating population densities. When you have a strong urban core, the densities gradually slope down the further you move away, creating a relatively stable, circular pattern that gradually fades away. When you have a bunch of weak cores dotted around a large area with no strong core to unite growth, you have the weak cores all creating competing density patterns that makes a mess of development.
So basically, you have a circle of density around Southfield that encourages its own spin off developments. Then you have another similar circle of density around Troy. Eventually, some group in a "suburb" of Southfield/Dearborn - say Farmington/Farmington Hills - tries to create its own economic core, and that creates another, albeit weaker circle with its own spinoff. Now there's "growth" all over that you have to continually pay for, but nothing strong enough to really feed new wealth into its spinoffs. Southfield and Troy simply don't have the economic power, and are busy enough trying to maintain what's been built. It's precarious and everything seems to being decaying after about 20-30 years.
All you have to do is look around at our metro area. We've been siphoning everything off of Detroit, growing out in all directions, while our overall population has basically remained the same. Without a strong core continually feeding into these new developments, how do you suppose we're going to sustain it? You can pretend everything is OK by concentrating the remaining wealth in specific areas, but it's all inevitably to the detriment of another suburb.
Only Detroit has the proper elements in place to create strong growth again. Sure, you could theoretically transition Troy or Southfield into a more tried and true urban model, but the will and money that would take is inconceivable in today's day and age.
Agreed. But what I read a lot is the people who are interested in living in an "urban core" and the culture that goes along with it give Detroit a try. They REALLY do. But they get frustrated with high costs of living, high insurance, high taxes, their cars being broken into, their car being towed from the local bars, the lack of friggin streetlights, and the feeling that everyone who is "smart" is moving out East or out West.
Most young people don't graduate from Wayne State and move out to Clarkston. They move to Atlanta. Or Virginia. Or Raleigh. Or Austin.
For every one person who loves Corktown or Avalon Bakery or the Dequindre Cut, there are ten people saying "C'mon man let's move the **** out of here."
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