Mayor Mike Duggan’s land value tax proposal is facing stiff resistance. Last week the bill stalled in the Democrat-controlled state legislature. Four Detroit City Council members are still criticizing the idea.
The plan would more than double the property tax rate people pay for land they own and cut the tax rate for buildings by about 70%. Duggan says it’s a necessary step to encourage development in the city, and claims it would be budget neutral. The proposal would also phase out Neighborhood Enterprise Zone tax breaks.
One of the goals of the tax plan is to reduce speculation by encouraging development and making it more expensive to keep vacant land. Most economic experts think the proposal would do that. James M. Hohman, director of fiscal policy with the Mackinac Center for Public Policy, wrote that the land value tax would eliminate a disincentive to development.
The proposal needs approval from the Michigan Legislature and City Council before it can go on a ballot in 2024 to be voted on by Detroiters.
So far, there are enough opponents in the state House to stall the bill. The vote was deadlocked at 50-50 last Wednesday before it was pulled. House Speaker Joe Tate (D-Detroit) signaled that it would likely come up for a vote again. Rep. Dylan Wegela (D-Garden City) opposed the plan saying it would benefit “billionaire property developers,” while those in favor said it would benefit homeowners and business owners.
The mayor has obstacles to overcome in Detroit as well. Four councilmembers — Latisha Johnson, Gabriela Santiago-Romero, Mary Waters and Angela Whitfield-Calloway — are all skeptical of the plan and lobbied against it in Lansing.
Santiago-Romero said she needed more time to evaluate the proposal, but that she would be open to putting it on the November 2024 ballot. Waters is working to scuttle it entirely and has even proposed a radical idea to eliminate property taxes in Michigan.
John Roach, Detroit’s director of media relations, told Outlier the city will continue to do outreach and education to lawmakers.
The city’s Chief Financial Officer Jay Rising laid out the plan in more detail to City Council last week. He said certain kinds of vacant landowners would be exempt from the tax if they applied for an exemption with the assessor. Urban farms under 15 acres, “publicly designated” property like community parks under five acres and homes with four or fewer side lots would all be exempt.
An expert on the heavy costs of tax foreclosure in Detroit also weighed in during a week filled with news and commentary about the land value tax. Alex Alsup, vice president of research and development at parcel data company Regrid, wrote in an op-ed that “Detroiters are paying speculators’ property taxes.” He argued that Duggan’s proposal doesn’t go far enough to correct a tax scheme that rewards blight. Naturally, a critic of the proposal is one of the city’s most notorious speculators: Dennis Kefallinos.
We’ll be paying close attention to the tax plan as it moves through the state capitol and the Coleman A. Young building.