walkitout (walkitout) wrote,

Property taxes in Detroit

In the course of going through my inbox, I'm reading some of the Lincoln Institute newsletters that built up over time.

Mark Skidmore wrote on of these articles and after describing the severity of the property tax delinquency problem in Detroit, said this:

"delinquency will abate when tax
payers perceive that they receive commensurate
returns for their money. Thus, improving the tax-
service package by upgrading core services such as
public safety will reduce evasion and lateness (Alm
et al. 2014)."

I have to say, I sort of wonder about this, especially since the appraisal value and tax value of properties in Detroit is apparently quite lunatic when compared to market value. On the one hand, it sort of doesn't matter what the basis is that you tax on, as long as everyone's property is inflated or deflated by the same amount. On the other hand, while people are generally pretty okay with tax value that is _lower_ than market value, they can often get tetchy about tax value that is remarkably _higher_ than market value (there's a sort of stickiness involved, basically, psychologically).

Analysis of the problem focuses on all the revenue the city is failing to collect. I think that is misguided.


"Property owners increasingly are re-buying their land in tax-foreclosure auctions and legally erasing their debts. Last year, 600 properties were re-purchased by their owners, triple the number in 2010. That cost the city nearly $6 million in unpaid taxes."

Furthermore, banks and landlords are both allowing properties to go into foreclosure rather than pay the taxes. This suggests that in every conceivable way, taxes are too high. Skidmore is arguing, well, improve services and people will pay for them. But where are they going to get the money to improve services?

Either enforcement has to get a lot more serious (which is probably not viable, because it is expensive and likely to generate enormous pushback internally and externally) or taxes need to be charged at a level commensurate with the market value of the property. If letting a property go into foreclosure and buying it back is a no-brainer financially, then your taxes are way too fucking high.

And yet, apparently reducing taxes (either by correcting the appraisal and/or tax valuation, or by reducing the millage) isn't under discussion. Skidmore acknowledges that doing either of these would _also_ reduce delinquency (and wouldn't require additional service cost, imo -- might even save money if people started paying the lower rate -- better the $5 in reality than the fictional $50? Maybe?).

"Lowering tax rates would modestly reduce delinquency as well (Alm et al. 2014). Roughly double the regional average, Detroit tax rates are at the state’s maximum of 67 mills and 85 mills [DEITY ON A POGO STICK WTF!!!] per assessed value for homestead and non-homestead properties, respectively. While a reduction would improve the competitive position of the city relative to other communities in the region, currently there is no discussion of reducing property tax rates."

"Aligning assessed values more closely with actual market conditions will also reduce delinquency. Mayor Duggan recently promised to lower assessments by 5 to 20 percent across the city to reconcile them with state guidelines. However, Duggan’s promised reductions are just a small fraction of the 80 percent cut needed to bring assesment to market levels, according to Hodge et al. (2014a)."

If you live in Seattle proper, your rate is about 10 mill, IIRC. Also, Seattle tax valuation numbers run _lower_ than current market comps; even when they were briefly a little high during the bust, they were never as far off as Detroit's. (Ripped from King County's website: "Levy Code: 0010 Total Levy Rate: $10.29168" -- that's on a condo on Cap Hill, for example.) 1-2 years ago, the mirror image unit in my building on the same floor sold. The price paid was 25% higher than my last year's assessment (I have no idea whether that unit had any renovation done and, if so, when it was done. I've redone both bathrooms and the kitchen but the renos are 9-15 years old at this point; if they had more recent renos done, that might be reflected in the price. Our views are the same -- trees -- and we have comparable parking.).

The next time someone tells you how Detroit has so much trouble collecting your taxes, look at your $300-400K property in the city limits, and contemplate paying $25K a year in property taxes, instead of the 3-4K you are currently paying.
Tags: economics, politics, taxation
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