Options for Restructuring Detroit’s Property Tax

This study offers a detailed parcel-level evaluation of the property tax base within the City of Detroit. For a variety reasons, Detroit’s tax base has narrowed and this has resulted in a decline in the revenue-raising potential of the property tax. Further, state and city policies have created significant horizontal inequities. Despite these challenges, the potential use of special assessments offers an opportunity to broaden the tax base, reduce horizontal inequities, and while at the same time reducing actual tax payments for many property owners. The report models the consequences of several land-based (land value and land area) tax scenarios to evaluate the potential impacts of shifting to a special assessment. The scenarios presented are intended to clarify the consequences of the options; they are not recommendations. In particular, the report does not address the political or legal feasibility of these potential strategies for reform.

Another goal of any proposed change is to stimulate economic development and property value growth. While many economists favor a land based tax over the more traditional property value based tax on grounds of stimulating development, caution is warranted as the city represents only a third of the overall property tax burden. Thus, any proposed change to city property tax policies, though potentially helpful to development on the margin, will be dampened by the weight of the tax burden imposed by the overlying jurisdictions.