Thursday, June 17, 2010

Mailbag: What If We Stopped Paying Taxes?

In response to my post below entitled What If We Stopped Paying Taxes?, Dylan wrote in with a lengthy comment that deserves a longer than normal response. Therefore, I'm making my response a separate post of its own.
That's already been happening. People just walk away and let their houses fall into foreclosure. That's why the city is the largest landholder. Other cities pay a lot more in taxes than we do. They also typically have a city sales tax which extends into at least the inner ring suburbs. We're doing it all off property and income tax. And people are leaving with their taxes.
First, when I suggested that people simply stop paying taxes, I wasn't suggesting that they walk away from their homes. I was suggesting that they continue living here, just not pay taxes for the services that we aren't receiving.

As for the number of vacant homes and its implications on taxes, most estimates that I've seen put the number of vacant properties at 30 - 40% of Detroit's land mass. If our taxes were 30-40% higher than average and the services that we receive were on par with neighboring communities then that would make sense. However, that is simply not the case. We pay more than double their taxes and receive little to no public services.

As for your assertion that other cities pay a lot more in taxes than Detroiters do, that's not quite accurate. There are some places with a higher tax burden than Detroit - with a correspondingly higher level of services - however, those communities are few and far between.

According to the January 2010 issue of Forbes magazine, the national average for property taxes in the United States is $1,183. Most Detroiters pay anywhere from $2,000 - $3,000 in property taxes depending on the assessed value of their home. That is roughly double national averages.

In addition, Detroit is one of the few cities in Michigan with a local income tax. We are also the only one with a tax on utility services. Add all of that up and our total tax burden (property + income + utility taxes) is roughly three times the national average.

And we still don't get the most basic of city services on a consistent basis.

As for your comment about a sales tax, the first thing that one should point out is that such a tax is illegal in Michigan. For those cities outside of Michigan that do have a local income tax, they either don't have tax on utility services (New York City, for example) or they don't have an income tax (anywhere in Florida or Texas, for example).

Bottom line: Detroit has a tax burden on its residents that is roughly three times the national average. In spite of this, we do not receive basic city services on a consistent basis.

This, in my opinion, is completely unacceptable and it's time that it change.
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