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Detroit’s tax system is broken, but there are solutions

Detroit’s property tax system is broken. For most of us, this statement is nothing new. Story after story, there’s been written about the effects of property taxes on Detroit residents, and many of us have even seen the effects firsthand. Of course, for every problem there is a solution, but what if that solution goes against the interests of the city’s biggest landowners – will it receive the political support it has? need if it really helps everyone?

It seems that for this question the jury is still out. Executive Director of Wayne State’s Office of Business Innovation, Matthieu Rouling, supports a solution to the city’s property tax problems that may be exactly what Detroit is looking for. “Property taxes in the city are incredibly high, making it difficult to attract new developments and also lead to serious equity issues.” Roling said, “because of the high property tax mill [millage] rate, especially in a low property value environment, no one wants to build or rehabilitate large projects unless they get a property tax rebate [reduction]. ”

He continues: “Development practitioners (City, DEGC [Detroit Economic Growth Corporation], MEDC [Michigan Economic Development Corporation], etc.) in the city have become addicted to the granting of these allowances, which unfortunately created a very unequal tax regime.

Roling explains this through a story similar to those many of us know: A little old lady who has lived in a house on the east side for over 30 years pays $ 4,000 a year in property taxes even though the house does not. worth that $ 20,000. . On the other hand, there are young professionals in the city who pay $ 1,500 in property taxes and live in a condo costing $ 200,000 or more. “A property value tax system would lower property taxes for almost all resident homeowners in the city and go a long way in keeping more Detroiters in their homes, increasing property values ​​and solving this glaring problem. of tax inequality, ”he said.

Again, the little old lady pays almost triple the taxes on a property worth 10 percent of that of young workers.

Detroit’s current property tax system weighs tax bills toward taxpayer improvements, that is, buildings or structures on the land. This tax regime taxes anyone who tries to improve or improve the land they own and indirectly encourages low use of land such as junkyards, surface parking lots or agriculture.

If the burden of property taxes were instead shifted from taxpayer improvements to real land, it would create an incentive structure that would deter squatting or low land use and encourage owners to build or rehabilitate land. It is a property tax or a split tax system.

“It rewards good land uses that create density, and it punishes land use that creates abandonment or sprawl,” Roling explains. “For example, things like surface land and junk yards and other large, low-margin industries could see their tax bills go up, and land uses like residential homes and high-rise buildings. and office buildings would likely see their tax bills significantly reduced. ”

A split rate tax system would be neutral in the sense that in total, no new tax would be collected or imposed. However, it should be noted that if the city ever switched to this type of property tax system, there would certainly be positive and negative impacts. “If you own surface land, if you are a land speculator (squatter), or if you own large industrial assets with low margins, you would likely see your tax bill go up,” says Roling.

But most people in Detroit, especially homeowners, would benefit from this system. According to Roling, “… It would literally cut property tax bills in half for every person who owns their home in this city,” but it’s a difficult thing to do politically because it can affect the big landowners in the country. town like Soave, or among the Moroun. He continues, “That said, it would probably be a boon for the Gilbert and Ilitch worlds, as they have been more proactive in building or renovating vertically on the land they own.”

Regardless of the winners, Roling, speaking based on conversations with city officials, said Michigan laws require a change like this to Detroit’s property tax system requires support. legislative in Lansing, regardless of the potential winners and losers.

For Roling and many others looking for citywide solutions, it seems that now, as we begin to recover and heal from the effects of the pandemic, it is time to implement changes. . “It seems that the post-pandemic world has caused the pendulum of urbanism and density to return to suburbs and urban sprawl. Detroit’s recovery is still very nascent and fragile. Now is the time to find creative solutions to help us adapt to a new world.

“We don’t need to continue working with the same toolbox that we were using before. Property value taxes could be the silver bullet we’re looking for. I hope our elected leaders see the value and have the courage to act boldly.

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