Is a Land Value Tax the Solution to Detroit's Messed Up Property Tax System?
Detroit Mayor Mike Duggan argues that shifting taxes from homes to the land they sit on will encourage development and cut taxes for most homeowners. Local property tax activists aren't convinced.

The clock is ticking on Detroit's efforts to adopt a land value tax.
With just a couple weeks left to go in the Michigan Legislature's session, a must-pass package of bills enabling Detroit to tax land values has stalled thanks to the opposition of some Democratic lawmakers.
That spells trouble for Detroit Mayor Mike Duggan, also a Democrat, who has made the adoption of a land value tax his pet issue. He's pitched it as a way to fix the worst elements of Detroit's existing, highest-in-the-nation property taxes.
"We're going to double the taxes on the land, which means you as a homeowner pay less and the people who own abandoned buildings pay more, people who have surface parking lots pay more, and people who have scrap yards, pay more," said Duggan at a community meeting late last month, reports the Detroit News.
The idea that Detroit's property tax system is in need of serious reform is not a controversial opinion.
While much of the rest of the country has too little housing, Motor City arguably has too much. Years of declining population and minimal economic growth have left 18 percent of Detroit's homes vacant. Many of those have fallen into a state of disrepair. The taxable value of Detroit's residential properties has halved in the last decade.
This sad state of affairs has only been made worse by the city's decision to continually increase its property taxes to make up for declining taxable property values.
Instead of netting the city more revenue, continual tax hikes have mostly produced a doom loop of tax foreclosures and property abandonment, which then lowers property values even more, prompting the city to raise rates.
The end result is persistent blight and the suppression of needed development.
Any "new investment boosts the property value which then gets taxed at the high rate. It's extremely high effective tax rates," says Andrew Justus, a housing policy scholar at the Niskanen Center and a former employee at the Detroit Land Bank Authority.
Enter the idea for a land value tax. The idea is that shifting the tax burden from existing homes to the value of the land they sit on will stabilize tax revenue, remove a disincentive for homeowners to improve their properties, and encourage speculating land owners to develop or sell their vacant parcels.
The Lincoln Institute of Land Policy has produced a series of white papers arguing for Detroit to adopt just such a policy. The idea has won a convert in Duggan, who first pitched the idea of a land value tax earlier this summer. In September, he unveiled a more detailed proposal for cutting the city's levy on actual structures while raising its tax on underlying land value.
The mayor argues his plan will give the average homeowner a 17 percent property tax cut while penalizing land owners holding vacant land as a speculative bet. Duggan says the shift to a land value tax will be revenue neutral.
Standing in the way of Duggan's land value tax is a lot of process, politics, and a general distrust of bright ideas from city hall.
In order to implement a land value tax, Detroit voters need to pass a referendum approving the levy. Before that happens, the Michigan Legislature also needs to sign off on the idea.
Getting lawmakers' approval has proven unexpectedly difficult.
In October, Democratic defections and abstentions stalled a package of bills giving Detroit the power to adopt a land value tax. In interviews with Bridge Detroit, legislative opponents said they needed more time to consider the complex proposal and complained that the land value tax issue was taking time away from other issues of statewide concern.
Local property tax activists have also come out strongly against Duggan's land value tax as well. For years, these activists have been fighting the city over-inflated property assessments that have overtaxed Detroit residents by some $600 million and forced many homeowners into tax foreclosure. A land value tax will do nothing to fix the continued overappraisal of property taxes, they argue.
"Mayor Duggan must prioritize stopping the illegally inflated property taxes that still affect the city's lowest valued homes," Bernadette Atuahene, a property law scholar and member of the Coalition for Property Tax Justice told Detroit News.
"A lot of people have expressed skepticism that the mayor's behind this, you can't trust the mayor, so, therefore, this must be a bad proposal regardless of what it does," says James Hohman, the director of fiscal policy at the free market Mackinac Center for Public Policy.
A land value tax wouldn't fix Detroit's lingering problems with tax assessments, says Hohman. But he also doesn't think it would make them any worse. In general, he argues a land value tax would shift the city toward a fairer, less economically damaging system of taxation.
"Better taxes are taxes that influence behavior less. There's not much that any individual landowner can do to affect their land value taxes or avoid their land value taxes. It will encourage some development," says Hohman. "Detroit has a lot of problems and this fixes one of them."
Rent Free is a weekly newsletter from Christian Britschgi on urbanism and the fight for less regulation, more housing, more property rights, and more freedom in America's cities.
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No democrat party tax plan reduces taxes.
^This.
What I'm hearing is that Detroit has lots of room for illegals.
Room? Sure. Nobody would move there on purpose, but there is certainly room.
No tax rate increase results in increased tax revenue.
Sounds a bit like Georgism. I’m surprised Reason doesn’t mention that this looks like a policy often favored by libertarians as the least bad tax system.
The direct tax system that they are emulating - the split-rate tax system in Pennsylvania is a Pittsburgh version of Georgism. There are other taxes though so it isn't a replacement for the entire tax system.
What I suspect they hope will happen is that commercial development will start up outside the areas where development only occurs via crony and tax deals. To tilt the city v suburb growth/costs back towards the city because developers-who-develop will have significantly lower effective tax rates than land-speculators-who-sit-on-their-butts-making-crony deals.
IOWs, it's worthless. Fuck off and die, chicken little.
Yep. Except I can't believe there are a significant number of land speculators in the City of Detroit. Values have dropped for 60 years continually (thus the tax base loss).
Property taxes =rent
It's an interesting idea to reverse the doom loop that Detroit's been in. The two players that could turn it into a scam are already on scene though - the Michigan legislature and the property tax activists.
A useful thing about this sort of tax reform is that it forces transparency about muni finances. I wonder who owns vacant land in Detroit now?
Ship all illegal migrants to Detroit. Problem solved.
They might head back home if that was mandatory.
It's a win either way!
bro if those Venezuelans thought Chicago was cold ...
If you think if even encourages transparency in municipal finances, you are naive. It doesn't come anywhere close to forcing such transparency.
Sure, don't bother looking at the progressive policies and priorities that created this mess, the solution is to shift around the impact of the consequences long after the fact. Is there any progressive solution that Reason doesn't fall over themselves to endorse?
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>>"We're going to double the taxes on the land, which means you as a homeowner pay less ..."
I also own the rights to sell The Gordie Howe International Bridge. ~~ Mayor Duggan
So you really can get blood out of a turnip?
I'm against property taxes. If you have to pay to keep it then you do not own it.
Not sure, seems there are complications.
Absent property tax, the 'landed gentry' were granted free ownership of the land, which they then charged rent from those using the land to grow 'corn'.
How did they come to the free ownership?
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"Detroit imposes an income tax of 2.4% on residents and 1.2% on nonresidents under MCL 141.61 and MCL 141.613, respectively. The law requires that an employer doing business or maintaining an establishment within the city withhold from each payment to its employees the Detroit income tax owed on their taxable compensation, after taking into account exemptions as reported on Form 5527, Employee's Withholding Exemption Certificate for the City of Detroit (DW-4)."
https://taxnews.ey.com/news/2023-0758-michigan-department-of-treasury-clarifies-detroit-income-tax-liability-for-remote-workers-and-employer-withholding-liability-during-the-covid-19-emergency-and-beyond
And this results in?
It results in clicks for whatever site the bot is promoting.
It results in Detroit being a high tax city with a high crime rate and a population that is about 1/3 of what it was at its high point in the early 1960's
Having once paid this very tax, it results in Taxation Without Representation, but a significant revenue source for the City.
As less attractive place to live
Detroit should not be shifting its property taxes. It should be eliminating them. The extraordinary taxes drive anyone thinking of investing in Detroit away. Why would you build a business in Detroit City, when you can build one in Rochester (12 miles north) and not pay such ridiculous rates, and not have to face the crime?
How long until they figure out they can do both a property tax and a land tax? Think of the revenue!