Discuss Detroit Archives - Beginning January 2006 Commuter tax has driven jobs out of the city (Philly style) Previous Next
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Lilpup
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Username: Lilpup

Post Number: 959
Registered: 06-2004
Posted From: 64.12.116.204
Posted on Monday, April 24, 2006 - 10:19 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

still think this is something to think about - even if the city tax could be directly credited against state tax that would help


Commuter tax has driven jobs out of the city

No other city in America is as dependent as Philadelphia on taxes paid by commuters.

The city's nonresident wage-tax rate of nearly 3.8 percent is by far the highest in the land. It produces about $520 million a year, roughly 15 percent of a $3.5 billion city budget.

So, it's not easily done away with. And it sounds reasonable to make people who spend their workdays in the city help pay its bills.

But if a commuter tax is such a good idea, why do so few cities have one?

It's simple: Most states, including New York, don't allow it.

And why do some cities that do have the tax, including Cleveland and Detroit, seem to be struggling?

Well, some economists say the tax (if high enough) can harm a city by discouraging job creation.

Paul Gessing, former policy director of the National Taxpayers Union, a Virginia-based budget-watchdog group, once called Philadelphia "the prototypical example of a city that has been irreparably harmed by steep commuter taxes."

Robert Inman, a municipal-finance expert at the Wharton School of the University of Pennsylvania, says the tax has helped push a lot of jobs out of the city and into the suburbs.

Unlike the city's resident wage tax, which is based on where a person lives, the commuter levy is a tax on jobs. Consider how it affects any Philadelphia firm.

To recruit employees who live and work outside the city - or to transfer workers from suburban branches - a company often must hike salaries to offset the tax. (It's less of an issue for New Jersey residents; their commuter tax is credited against state taxes.)

And the commuter tax is no small consideration for a firm's executives, if they live in the Pennsylvania suburbs.

The problem is easily avoided: Shift operations outside the city limits.

Lots of jobs have left over the years, although the commuter tax is hardly the only reason. And don't expect any dramatic change in the tax anytime soon.

The city, which has been trimming the wage tax for everyone since 1995, plans to cut the commuter rate more slowly than the resident rate from here on.

So although both rates figure to decline gradually in the years to come, the commuter rate will almost surely be the nation's highest for a very long time.
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Alexei289
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Username: Alexei289

Post Number: 1111
Registered: 11-2004
Posted From: 68.61.183.223
Posted on Tuesday, April 25, 2006 - 1:13 am: Edit PostDelete PostMove Post (Moderator/Admin Only)

... its the whole point behind having seperate state governments.. (why i think having the feds take our money so we can beg for it back is bullshit so they can hold the strings for things like the drinking age)... it fosters competition within the government so that the government must operate at maximum efficiancy, or lose out to another state. Just like business. States must do with what they have, or have with what they do... those that dont... like michigan, where we have mediocre taxes, but no benefits for paying those taxes, will suffer greatly.

BTW, the feds are thinking about throwing the country into another recession. mnaybe about a year from now, they will send this country into a high interest rate to foster investing to improve savings.. so what by the end of the decade they can start another boom.

What we in michigan dont realize, is that the rest of this country is booming by leaps and bounds.... just like every other cycle in american history. The state of michigan may lose out on an ENTIRE CYCLE of economic health and prosperity... before the next inevitable recession. Other states are passing us by while we will be his harder in the next recession, and have less to build on after.

Good luck, our state is run by morons.
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Ltorivia485
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Username: Ltorivia485

Post Number: 2604
Registered: 08-2004
Posted From: 199.74.87.98
Posted on Tuesday, April 25, 2006 - 2:43 am: Edit PostDelete PostMove Post (Moderator/Admin Only)

The sad part is that if Detroit gets rid of the city income tax, Detroit would have been in receivership a long time ago. Do you really want that?
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Mcp001
Member
Username: Mcp001

Post Number: 2133
Registered: 11-2003
Posted From: 69.14.135.95
Posted on Tuesday, April 25, 2006 - 7:31 am: Edit PostDelete PostMove Post (Moderator/Admin Only)

I remember something a long time ago in history class about "No taxation without representation!" (I know, I know, I'm dating myself now).

This article hit the nail on the head, but the current spending addicted government is too afraid to act due to the amount of vote buying the current non resident income tax (among others) generates.
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Hamtramck_steve
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Username: Hamtramck_steve

Post Number: 2911
Registered: 10-2003
Posted From: 68.248.17.203
Posted on Tuesday, April 25, 2006 - 8:04 am: Edit PostDelete PostMove Post (Moderator/Admin Only)

That's about the lamest article that uses lots of words yet says nothing that I've read in a long time.

Wow, all of Philly's problems can be solved by ditching the "commuter tax"! Oh, wait, it says here "Lots of jobs have left over the years, although the commuter tax is hardly the only reason."

The use of "hardly" there seems to imply a somewhat sarcastic tone, as though it would be foolish to consider the commuter tax an important reason for jobs fleeing.

My guess, right off the top of my head, is that Philly's decline started long before they had the tax.

One last thing. The article mentions "It's less of an issue for New Jersey residents; their commuter tax is credited against state taxes." That's also the case here in Michigan, yet I never hear about that in relation to bitching about Detroit's income tax. Along with the federal deduction for state and local taxes, by the time you're done passing the 2-something percent tax through, you've paid a few cents a day.

And if you work in that locale, your money goes toward the fire and police coverage to keep your cheap-skate butt safe.
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Paulmcall
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Username: Paulmcall

Post Number: 665
Registered: 05-2004
Posted From: 68.40.119.216
Posted on Tuesday, April 25, 2006 - 12:52 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

This tax was put on in the 60's when Detroit had a big deficit. They have since relied on it instead of cutting the cost of government and can't do without it.
By the time they get the budget in order, there will be few people left in the city to tax. Outsiders have just had to pay the price for local government spending more than they bring it.
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Jiminnm
Member
Username: Jiminnm

Post Number: 470
Registered: 02-2005
Posted From: 68.35.85.184
Posted on Tuesday, April 25, 2006 - 1:09 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

Does the City of Detroit still tax utility services within the city? That is/was a terrible idea also.
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Miss_cleo
Member
Username: Miss_cleo

Post Number: 169
Registered: 05-2005
Posted From: 69.47.85.139
Posted on Tuesday, April 25, 2006 - 1:10 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

The sad part is that if Detroit gets rid of the city income tax, Detroit would have been in receivership a long time ago. Do you really want that?


yes, its been proven time and time again that the city cannot run itself , they are inept
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Eastsidedog
Member
Username: Eastsidedog

Post Number: 278
Registered: 03-2006
Posted From: 12.47.224.7
Posted on Tuesday, April 25, 2006 - 1:47 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

Jiminn, yes there is still a utility tax. It adds like $5 to my phone bill every month.

Ltorivia485, I suppose we could solve our budget crisis by bumping the income tax up by a percentage point. It seemed to work for Coleman Young (and heck even the voters agreed to it).

Personally I think it should be switched so residents pay 1.25% and non-residents pay 2.5%. Then it should be slowly phased out like Engler wanted (.1% per year).
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Mcp001
Member
Username: Mcp001

Post Number: 2139
Registered: 11-2003
Posted From: 69.14.135.95
Posted on Saturday, April 29, 2006 - 4:52 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

Where's the call to allow non-residents who are compelled to pay the city's income tax the right to vote in city elections?

After all, if the money that they're paying is going into city services, then they should have every right to dictate where that money goes via the ballot box.
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Motorcitymayor2026
Member
Username: Motorcitymayor2026

Post Number: 763
Registered: 10-2005
Posted From: 68.74.10.30
Posted on Saturday, April 29, 2006 - 5:02 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

In last years budget, didnt the income tax produce about $250 million, or 1/6 of the budget??

I certainly think this tax needs to be somehow phased out, but where is the extra $$ going to come from?? Tough call.
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Mcp001
Member
Username: Mcp001

Post Number: 2143
Registered: 11-2003
Posted From: 69.14.135.95
Posted on Saturday, April 29, 2006 - 5:25 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

Non-resident right to vote in city elections or scrap the tax.

Simple choice.

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