Economic development in Detroit will take money the city doesn’t have.
A report by The Atlantic showed overall Detroit had $444 million in unpaid taxes and penalties owed to it. Since the crash on Wall Street in 2008, the property tax base has collapsed and state law says municipalities cannot collect sales tax.
So where is the money supposed to come from?
Data from the Tax Foundation shows Detroit levies an income tax of 2.50 percent on residents, and 1.25 percent on nonresidents. Corporate taxes amount to 2 percent. Detroit’s residents are mostly poor and can’t afford a heavy tax burden but the city, which was recently declared to be in financial crisis, must find better and more efficient ways to raise revenue.
Ireland, a country with a massive debt load, has had to find new sources of revenue. The International Monetary Fund has implored indebted countries like Ireland to tax environmental pollutants. The country has since imposed taxes on carbon emissions (fossil fuels burned by companies) and the amount of trash thrown out by residents.
Every trash day in Ireland the garbage trucks collect street-by-street, but before they dispose of the trash, they weigh the black bins. Residents are taxed based on the weight of their garbage and green bins for recyclables are emptied for free.
Detroit, which has had trouble paying for simple services like trash collection, should enact a similar plan.
Companies in Detroit are subject to a corporate income tax, but could instead be taxed based on the fossil fuels they burn or air pollutants they emit. It would be a way to raise taxes from companies, but also allow breathing room for the newer and tech-driven companies, which don’t
have to burn fossil fuels to be innovative while lowering their tax liability.
Another example of an environmentally friendly and fiscally responsible policy is road pricing.
“When demand for the road is high, the value placed on using the road—a toll—is higher than other times of the day,” reads a description of road pricing by the Environmental Defense Fund, an organization dedicated to using market forces to solve environmental problems.
In “Traffic Jam Economics,” New York Times contributor and economist Nancy Folbre writes about London’s enactment of the plan in 2003, “The widely heralded results include a decrease in traffic, improvement in air quality and expansion of bus travel and biking.”
Most residents of London, including the business community, support the policy. Decreases in road traffic translate into increases in sidewalk traffic, which benefits storefronts.
The idea has already been endorsed by the National Surface Transportation Infrastructure Financing
Commission as a new funding source for U.S. highways.
Road pricing was also proposed by Mayor Michael Bloomberg of New York City and was expected to raise $1 billion by some estimates but was never enacted.
Detroit is in financial crisis with a long-term debt of $14 billion and a short-term debt of $6 billion.
The city has had a budget deficit every year since 2004. The confines of the debate cannot be whether we raise tax rates to raise more revenues or cut taxes to attract more citizens, but rather should focus on what we tax and why.
