Proposed Detroit Sales Tax: A Boon or Burden on Detroiters?
Detroit residents have complained for years about high property taxes. In fact, we’re some of the highest taxed residents in the state. Yet like all other Michigan cities, property taxes are our primary source of revenue. In cities with weak tax bases like Detroit, we often struggle to collect desperately needed funding. Add to this the drying up of ARPA dollars, and we have a serious problem.
A new report from the Citizens Research Council of Michigan, commissioned by the Detroit City Council last year, proposes a possible new source of revenue – a 1% sales tax. They estimate that the tax could raise from $42 to $71 million per year, costing Detroit households an average of $167 per year.
Sales taxes are generally regressive, i.e. they make up a larger percentage of income of low-wage workers. Some of that burden would be eased by exempting groceries, prescription drugs, and water from taxation.
Authorizing a local sales tax in Michigan would require amending the state constitution, adopting state statutes authorizing local sales and use taxes, and approval by the City Council as well as Detroit voters. Skeptics of the sales tax say this would require more cooperation between Detroit and Lansing than we’ve seen in recent years.
One type of sales tax that wouldn’t require a constitutional amendment is a tax on tickets at entertainment and sports venues throughout the city. Most of the people who attend these downtown events come from the suburbs, but the city bears the cost of maintaining infrastructure and providing police protection. An entertainment tax would shift more of the financial burden to those who use these amenities.
The Citizens Research Council estimates that a 3% ticket tax would generate an extra $14 million per year, while the highest tax rate of 10% would bring in an additional $47 million per year, comprising a little less than 3% of the General Fund.
With so many numbers to crunch and so many political factors to consider, this process is likely to take a long time to unfold. We look forward to getting all the information we need from Mayor Sheffield and our City Council members over the coming months to make our own decision on this complicated issue.
