Another move to central control, via property taxes

Investment Analysis Clubs Macro Economic Trends and Risks
1

The ABC national news, tonight, reported on these states: Wyoming, Kansas, Colorado, Georgia, Nebraska, Idaho, and Michigan, all considering proposals to reduce, or eliminate, local property taxes.

Michigan cut property taxes once already, and raised sales tax from 4% to 6% to compensate. What happened? Now cities and counties are dependent on Lansing for education and infrastructure (primarily road maintenance) funding. But Lansing has had other ideas, like giving the “JCs” more tax cuts. So many school districts no longer offer shop classes, or driver’s ed, even as an elective. I was looking at the City of Farmington high school course catalog, and nearly every academic class charges a fee. What a long way we have come, in terms of defunding education, since I was in high school. And Michigan’s roads, before the current Gov took office, were some of the worst in the country, with per capita road maintenance budget far below surrounding states.

While education is funded by Lansing now, I pay property tax for my local police and fire departments, and the public library. I also pay a local property tax for road maintenance, even thought the township is not really responsible for the roads in the township, because the state, and county (which is dependent on state funding), were not getting the job done.

So what would happen with all property tax zeroed out? Probably a big increase in sales tax, like last time, which would hit the segment of the population that spends the greatest part of it’s income, the hardest. Meanwhile, those who spend a lower portion of current income, get a big tax break on their mansion in Bloomfield Hills, and a bigger break on their “cottage” on Torch Lake.

9 Likes
2

AxMiTax is being talked about up here,too, of course. I tried to politely engage the person asking for signatures, but she had absolutely no specific info that she could speak on, and ended up just referring me to their website, which I have admittedly not done.

This has the odor of a disaster in waiting, in my opinion. Americans either want something for nothing, or they claim that they do not use any of these “community” services or facilities, so they say cut away. But I’ve seen more skepticism than support for AxMiTax locally here, so hopefully it gets turned down.

Americans keep walking on the edge of a cliff, and there are plenty of self centered groups willing to push them over the cliff if it benefits them. SS, Medicare, Public Schools, local and National Parks just to name a few of the things that benefit so many people, but groups are working behind the scenes to drum up interest in eliminating them. One of these days, if they’re not careful, Americans are going to get what they asked for.

7 Likes
3

How about a different approach like this: Eliminate the property tax… because it is largely disconnected from the ability to pay and you’re basically renting your property from the government since they’ll take it if you stop paying the rent (ie, taxes). INSTEAD… have local government levy income taxes. You know it’s feasible because Pontiac and Detroit have income taxes. Let your county or township or whatever dip it’s hand into your pocket and they’ll take their cut.

The typical retiree would benefit greatly. I’m a retiree, but it would be terrible because… while I have property, I have far greater income through my investing… so I’m not looking at this from the standpoint of “how can I benefit me?”.

Disclosure: Spent most of my life in Michigan. Born in Detroit. Worked in Pontiac for a while. Lived a lot in West Bloomfield, Farmington Hills and Howell. Now in North Carolina.

Rob
He is no fool who gives what he cannot keep to gain what he cannot lose.

2 Likes
4

I worked in Albion in the summer of 75. Discovered that city has an income tax too. iirc, there is a limit to how much cities can charge in income tax.

A few weeks ago, there was a thread on this board about which states have the most regressive tax schemes. iirc, the linked article said some 41 of the 50 states have regressive tax schemes. Michigan was only the 34th most regressive. I am sure eliminating property tax, and, most likely, increasing the sales tax, would move Michigan up the regressiveness scale quite a bit.

Businesses in Michigan used to pay a property tax on their equipment to local cities. Gov Snyder repealed that tax, assuring cities that Lansing would make up for the lost revenue by sending cities a compensating amount from the use tax. Of course, that use tax money was being used for something else, but what that “something else” was that was defunded to make the money available was a deep dark secret. It increased Lansing’s control over cities, and gave the “JCs” another free ride, apparently a win/win for the (L&Ses) in Lansing.

Steve

1 Like
5

Traverse City, along with the industrial swath from Saginaw to Detroit, tend to vote one way, while all the forest and farmland that covers most of the state votes the other way. The two sides are pretty closely matched in numbers.

Since the US embraces “supply side economics”, selfishness has been promoted as a worthy mindset. The theme has always been “throw your neighbor under the bus, and maybe you will get a tax cut or a job”. I noticed several of the people in the linked article crying about the property tax were saying they didn’t have spawn in school, so they don’t want to pay anything for schools.

For the halibut, here are the components of my property taxes, The school taxes are in my summer bill. The “State Education Tax”, of 6 Mills is collected by the township, but then the money is sent to Lansing. The school operating tax of 18 Mills, the highest rate of all the property taxes, is not levied on primary residences, so all the people whining about paying school tax on their homes don’t know what they are talking about. Only beneficiaries of eliminating that tax would be “JCs” and people with second, or third, or more, houses.

A Closer Look at your Summer Tax Bill

My winter tax bill covers operations for Wayne County, the county jail, parks, township operations, police, fire, library, Detroit Institute of Art (approved by voters) and township road improvement (approved by voters)

https://www.cantonmi.gov/945/A-Closer-Look-at-your-Winter-Tax-bill

2 Likes
6

What do you mean by “JCs”? Google is of no help.

Rob
He is no fool who gives what he cannot keep to gain what he cannot lose.

7

Steve created his own lingo. JC is short for job creator.

DB2

8

JOB CREATORS, the most important creatures in the history of the universe and so to be cossetted at all times!!!

from the METAR dictionary of economic terms, attributed to Steve in the ancient archives, now lost

7 Likes
9

The wealthy tend to be adept at being able to live without “income”, and thus can avoid an income tax.

If you’re the beneficiary of inherited wealth with the stepped-up cost basis, you can live for quite a while on a “tax-fee return of capital” from the portfolio. (i.e., it’s all capital and zero “capital gains”.)

Compare that with the successful retirement investor who probably has 95% of his portfolio in long-term capital gains at a very low costs basis. (i.e., the remaining 5%)

intercst

5 Likes
10

LOL… thanks for the definition.

Rob
He is no fool who gives what he cannot keep to gain what he cannot lose.

11

Another term used is (L&S), singular, or (L&Ses) plural, denoting “leaders and statesmen” ie pols individually, or assembled as a governing body.

Both terms are used with enormous amounts of sarcasm.

Then there are the “General Rants”. The most popular is “Rant #37” about redistribution of wealth upward on the income scale.

Steve

1 Like
12

I spent the day on a river beating the heat, kayaking on a northern river that flowed into Lake Michigan ( great day ! ), so have 0 energy to look anything up, but I seem to recall that they pitched the sales tax increase be would be totally offset by lower property taxes. The part I don’t remember is the lower property taxes.

For me, AxMiTax will have to show proof, not wishful thinking, in order to get me on board. It sounds like more of the “if we lower taxes, there will be more tax dollars flowing into the tax coffers” fantasy. Graph of the national debt show what a load of malarkey that has been.

I dislike paying taxes as much as anybody. I do like living in a civilized society, too. Gotta balance them out. I will try to look online at the AxMiTax site, but I’m not real hopeful that it’s anything worthwhile.

1 Like
13

I doubt this thing can pass in any case. Aren’t more than 1/3 of the people renters who won’t see any direct benefit? I would assume that that the vast majority of them would vote against it. That is, if they even understand what they are voting about (“propositions” almost always have extremely convoluted verbiage on the ballot). Of course, homeowners tend to vote more than renters do, so maybe there’s a chance …

1 Like
14

Renters likely vote at a much lower rate than homeowners.

intercst

2 Likes
15

Quite true. One of the benefits of home ownership – more skin in the game and more civic involvement.

DB2

1 Like
16

I remember how the Shiny Gov at the time misrepresented it, as a huge cut in property tax, for “only a 2 percent increase in sales tax”, to make it sound like property tax would be cut way more than sales tax was increased. It was actually a 2 percentage point, ie 50% increase, in sales tax. I was in an apartment at the time, so could not prove that property tax went down at all.

The (L&Ses) in Lansing always play a shell game. Remember how they increased fuel tax and registration fees, a few years ago, “for road maintenance”? While the increased fuel and registration costs raised $300M “for the roads”, they took $300M out of road maintenance, that had been coming from general revenue, to help cover those two rounds of tax cuts for the “JCs”, So Michigan roads continued to be some of the most underfunded, and worst, in the country, in spite of Michigan having one of the highest tax burdens on fuel in the country.

But that still made Michigan’s tax regime only the 34th most regressive in the country. Eliminating property tax, in exchange for a big increase in sales tax will, no doubt, make Michigan’s tax regime more regressive.

Steve

4 Likes
17

Well, that is the narrative that the RE industry, and it’s water carriers in the media, always promote: “homeowners are better citizens, so everyone needs to promote the narrative that everyone should buy a house, and the government needs to subsidize the debt people undertake to buy a house”

Steve

1 Like
18

Multiple surveys have shown that homeowners vote at a higher rate than renters. I’m in favor of people voting, but YMMV.

Screenshot 2024-06-18 at 8.11.29 AM
Screenshot 2024-06-18 at 8.11.29 AM1454×730 105 KB

DB2

2 Likes
19

I have posted before, the “Yes Minister” demonstration of how surveys can be manipulated to yield the desired result.

You are clearly “out of step”, with the advocates for making it harder to vote. :slight_smile:

Steve

2 Likes
20

There are many surveys by many organizations (including the Census Bureau) spanning decades. But the data include non-survey results. For example:

Andrew B. Hall, a professor of political economy at Stanford Graduate School of Business, and Jesse Yoder collected two decades’ worth of election records on 18 million people in Ohio and North Carolina. Then they combined that with deed data to see if people’s behavior changed when they became homeowners.

The result? They found that buying a home really did cause people to vote substantially more in local elections—and the bump in turnout was almost twice as big when zoning issues were on the ballot. What’s more, the effect increased with the purchase price. The greater the asset value, the more likely people were to vote.

DB2