July 29, 2013

Virtually Unreported: Detroit’s Bankruptcy Came With Sky-High Tax Rates, Not ‘Small Government’

Just over a week ago, MSNBC’s Melissa Harris Perry claimed that Detroit’s bankruptcy is a result of “when government is small enough to drown in your bathtub,” and analogized it to “exactly the kind of thing that many Republicans would impose on us.”

The truth, of course, is that Detroit has had quite a large government. It also had and still has frightening rates of violent and nonviolent crime, incredibly awful schools, and a race-based culture that the press once praised. What is far less appreciated is what Detroit did to chase citizens and businesses out of the city in the form of sky-high taxes.

In 2012, Detroit’s income tax was the highest in Michigan by far. Using the correct language of taxation, the city’s 2.5% rate is 25% higher than 2% rate in the state’s runner-up, Highland Park (0.5% divided by 2% is 25%), and is 2-1/2 times as high as most other cities which have a 1% rate.

At Townhall today, the Cato Institute’s Chris Edwards went to an even less-known element of taxation: the property tax. The following graph illustrates how Detroit’s property tax rates compare to the average of the 50 largest other cities in the U.S. (HT I Hate the Media):


In the liberal financial model, clearly the template used by the establishment press, people and businesses don’t react to tax increases, other than to accept them, pay them, and go on with life and business as usual. The reality is that they don’t.

Usually, they vote with their feet and leave. But in extreme cases like Detroit, they simply fail to pay them (bolds are mine):

Nearly half of the owners of Detroit’s 305,000 properties failed to pay their tax bills last year, exacerbating a punishing cycle of declining revenues and diminished services for a city in a financial crisis, according to a Detroit News analysis of government records.

… “Why pay taxes?” asked Fred Phillips, who owes more than $2,600 on his home on an east-side block where five owners paid 2011 taxes. “Why should I send them taxes when they aren’t supplying services? It is sickening. … Every time I see the tax bill come, I think about the times we called and nobody came.”

Though there are surely many others in Detroit who feel the same way, there are more than likely quite a few who simply can’t afford to pay what the city says they owe.

Cross-posted at NewsBusters.org.



  1. Failed to mention income tax.
    About 4.25% in suburbs 6.7% in the city.

    Comment by jon — July 29, 2013 @ 4:18 pm

  2. I mentioned that Detroit is 2.5%.

    I think the 6.7% rate you quote is combined state and city (maybe all on the same tax form?), but if I’m wrong, let me know.

    Comment by Tom — July 29, 2013 @ 4:31 pm

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