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One solution to the property tax foreclosure crisis in Detroit? End property taxes.

a house with a foreclosure sign in front of it
Flickr - http://bit.ly/1rFrzRK
Michigan ranks 8th in the nation for foreclosures

Many people in Detroit cannot or, sometimes in the case of landlords, do not pay property taxes. Every year, the Wayne County Treasurer's Office seizes owner-occupied homes and puts them up for auction.

Even with recent efforts to get homeowners on installment plans, lowering interests rates, and letting more low-income people know they might be eligible for property tax wavers, it hasn’t been enough to keep many people in their homes. There’s a high poverty rate in Detroit.

A recent article in the Free Press noted that a professor of law at Wayne State University has some ideas to solve this crisis. John Mogk has been researching Detroit for decades.

Mogk has proposed eliminating the residential real property tax for owner-occupied homes, and making up for the lost revenue by maintaining the property tax only on landlords and commercial property, adding a local sales tax, raising the tax on commercial properties, and imposing a small tax on nonprofit institutions.

Mogk sat down with Stateside’s Lester Graham to discuss his idea and the possible effects it would have on Detroit.

You can listen to their conversation above, or read highlights below.

On impoverished families that are hurt by property taxes

“There are a couple good reasons [to get rid of residential property taxes] but the most important is the population of the city is mostly poor. Forty percent of the city is in poverty, and a large percentage is just above the poverty level. The median family income is about half the national median family income, roughly in the range of $25,000 a year for a family of four.”

“And these families have difficulty making ends meet. Feeding themselves, covering their health care, covering their taxes and other repair problems with their homes, they can’t afford on a regular annual basis to pay a property tax. And that results in a large number of foreclosures - thousands and thousands every year, and homeowners being thrown out. Some of them stay on after the eviction and basically are squatters in their own homes.”

“It’s a very, very serious public welfare issue. In my view, given the distressed conditions of the city and its neighborhoods, the best thing to do, to eliminate tax foreclosure on owner-occupied homes, is to eliminate the tax.”

On the impact of eliminating property taxes of owner-occupied homes

“The way it’s worked out over time in the city of Detroit is that the local property tax is a very small percentage of total city revenue. So revenue from the income tax, revenue from the casino tax, revenue received from state revenue sharing and other resources represent almost 90% of the revenue the city receives to support their needs and to deliver city services.”

“In terms of the total property tax itself, it represents maybe 10-15% of the total city revenue. Owner-occupied residential property is only a small percentage of that percentage. So a large percentage is paid by industry, by commerce, by landlords, and by other taxable properties. So what we’re talking about in terms of eliminating the revenue stream from owner-occupied property taxes is a small percentage of a small percentage.”

On the benefits of eliminating the real property tax

“There’s really three strings to the bow. One is to prevent people from being evicted, the other is to encourage people to come in and essentially take over vacant homes and rehab them, and the third is to convince people who are living in occupied homes who can pay their tax not to move to the suburbs, but to stay.”

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