Letter to the editor: A Path to Prosperity: The Case for Eliminating Property Taxes in Michigan

6-9-2024

The debate over Michigan’s property taxes has reached a critical juncture with the proposal of the AxMiTax initiative, which seeks to eliminate property taxes across the state. In the recent article from the Manchester Mirror, AxMITAX — what would it mean for Manchester?, the City of Manchester expresses concerns about the implications of this proposal. However, a thorough examination reveals that eliminating property taxes can bring about significant economic growth, increased fairness, and a more sustainable financial future for Michigan. Here, we provide a detailed rebuttal to the article’s concerns, highlighting the manifold benefits of a property tax-free Michigan without fearmongering.

The article’s primary concern is the $17 billion annual property tax revenue, which currently funds various public services, including schools, infrastructure, and public safety. The apprehension is that without this revenue, these services would suffer. However, this perspective overlooks the potential for multiple alternative revenue streams that can not only replace but possibly exceed the current property tax revenue, ensuring continued and improved funding for essential services. I want to discuss a few of these ideas.

Let’s talk about how creative Michigan is at collecting taxes in new and innovative ways:

1. Increased Sales Taxes: Michigan can generate significant additional revenue by slightly raising the state sales tax. For example, a 1% increase in the sales tax could yield approximately $1 billion annually, given the state’s current retail sales figures. This shift would spread the tax burden across all residents and visitors, not just property owners, thereby fostering a more equitable tax system.
2. Expanded Tax Base: Expanding the tax base to include services and luxury items can further increase state revenue. Taxing luxury goods such as high-end electronics, vehicles, and vacation homes, which higher-income individuals typically purchase, ensures that those with greater means contribute more to public services.
3. Environmental and Health Taxes: Implementing taxes on pollution and unhealthy products, such as sugary drinks and tobacco, can serve dual purposes. They discourage behaviors that lead to increased public health and environmental costs while generating additional revenue for the state. For example, a $0.01 per ounce tax on sugary beverages could generate over $200 million annually.
4. Online and Digital Goods: The digital economy represents a significant untapped revenue source. By taxing online purchases and digital services, Michigan can capture revenue from a growing sector that contributes little to state taxes, and I support this as a business owner providing digital services.
5. Local Option Taxes: Allowing municipalities the flexibility to introduce their local sales taxes can help offset the loss of property tax revenue. Local governments can tailor these taxes to meet the specific needs of their communities, ensuring that essential services are adequately funded.

Attracting Businesses and Residents:

A property tax-free Michigan would be a beacon for businesses and residents, offering significant economic benefits and reversing the current population decline and economic stagnation trend.

1. Competitive Edge: Eliminating property taxes would give Michigan a distinct competitive advantage over other states. Businesses seeking to minimize operational costs would find Michigan an attractive destination, attracting new companies. Ending property taxes would create jobs and broaden the tax base through increased corporate and individual income taxes.
2. Equal Opportunity: Currently, large corporations often receive property tax exemptions as incentives to relocate, placing local businesses at a disadvantage. By eliminating property taxes, Michigan would level the playing field for all businesses, fostering a more competitive and vibrant economic environment. This fairness would encourage local entrepreneurship and attract small and large enterprises outside the state.
3. Increased Investment: Businesses would be more likely to invest in property and infrastructure if property taxes were not burdened. This increased investment would lead to greater economic activity, job creation, and higher income and sales tax revenues, offsetting any initial losses from the elimination of property taxes.

Residential Attraction:

1. Affordable Living: Eliminating property taxes would make homeownership more affordable, particularly for low-income families, the elderly, and minorities disproportionately affected by high property taxes. This affordability would attract residents from other states, reversing Michigan’s population decline and boosting the state’s economy through increased consumer spending and tax contributions.
2. Quality of Life: Lower housing costs would improve the quality of life for current residents, making Michigan a more desirable place to live. Michigan is facing an exodus like no other, and eliminating property taxes would help retain talent and attract new residents, further bolstering the state’s economic and demographic health.

Safeguarding Essential Services:

Opponents of AxMiTax have raised a fundamental concern about the potential impact on essential services such as education, police, and fire departments. However, the AxMiTax proposal includes specific safeguards to ensure these services are adequately funded without property taxes.

1.  Protected Funding for Critical Services: The AxMiTax proposal includes provisions to protect funding for essential services. Revenues from increased sales taxes and other alternative sources are explicitly earmarked for critical services such as schools, public safety, and infrastructure, which ensures that these services continue to receive the funding they need to operate effectively.
2. School Funding Security: The proposal ensures that schools will not suffer from the loss of property tax revenue. A portion of the revenue generated from alternative taxes will be dedicated to education, ensuring that schools have a stable and predictable funding source. This will allow schools to maintain high-quality education standards and invest in necessary improvements.
3. Guardrails Against Government Waste: AxMiTax includes measures to prevent wasteful government spending. By eliminating property taxes, local governments will need to prioritize their spending and make more efficient use of taxpayer dollars. The proposal encourages transparency and accountability in government spending, ensuring that public funds are used effectively to meet the community’s needs.

Enhancing Fairness and Equity:

The current property tax system is inherently inequitable, placing a disproportionate burden on property owners, particularly those already financially vulnerable. Eliminating property taxes would create a fairer tax system that distributes the burden more equitably among all residents.

1. Equitable Contribution: A consumption-based tax system ensures everyone pays their fair share based on economic activity rather than property ownership. This approach reduces the burden on the ever-dwindling number of homeowners, many struggling to keep up with rising property taxes. It ensures that renters, who also benefit from public services but also find themselves priced out of the rental market with the ever-increasing rents based on the increased property taxes, contribute to their funding.
2. Support for Vulnerable Populations: High property taxes can lead to the displacement of vulnerable populations, such as the elderly and minorities, who may be forced to sell their homes due to an inability to pay. Eliminating these taxes would provide financial relief to these groups, allowing them to remain in their homes and communities and contributing to greater social stability and cohesion.
3. Encouraging Homeownership: By removing the financial barrier of property taxes, more people will be able to afford to buy homes. This increase in homeownership can lead to greater community investment, higher property values, and improved neighborhood stability.

Addressing Economic Concerns:

Opponents of AxMiTax argue that eliminating property taxes would jeopardize funding for essential services such as schools, police, and fire departments. However, a strategic approach to tax reform can ensure that these services continue and are funded more sustainably and equitably.

1. Prioritizing Essential Services: The state can prioritize funding for essential services by ensuring that a significant portion of revenue from alternative sources is allocated to these areas. For example, revenues from increased sales or environmental taxes could be earmarked for education and public safety, ensuring these critical services are well-funded.
2. Efficiency and Accountability: Eliminating property taxes could also lead to more efficient and accountable government spending. Without the crutch of property taxes, state and local governments would need to prioritize spending and eliminate wasteful expenditures, leading to more effective use of taxpayer dollars.
3. Innovative Funding Models: Michigan can explore innovative funding models such as public-private partnerships and targeted grants to support essential services. These models can leverage private sector efficiency and investment to provide high-quality public services without relying on property taxes.

The Broader Economic Impact:

Eliminating property taxes would have far-reaching positive effects on Michigan’s economy, leading to increased economic activity, higher employment rates, and greater overall prosperity.

1. Economic Growth: The influx of businesses and residents would stimulate economic growth, leading to higher incomes and increased consumer spending. This economic activity would generate substantial sales and income tax revenue, offsetting the loss of property tax revenue and providing a stable financial base for the state.
2. Job Creation: Attracting businesses to Michigan would create jobs across various sectors, from manufacturing to services. This job creation would reduce unemployment, increase household incomes, and boost the state’s economy through increased consumer spending and tax contributions.
3. Sustainable Development: By removing the burden of property taxes, Michigan can create a more attractive environment for investment and growth. There is no convincing debate in favor of taxing personal property and keeping property owners locked into a permanent tenancy on land they own and have already paid taxes on that would lead to a more robust economy and provide long-term financial stability for the state. Contrary to the fearmongering you see everywhere, ending property taxes in Michigan has no downside.

A Vision for a Prosperous Michigan:

The AxMiTax proposal represents a bold step towards a more equitable, competitive, and prosperous Michigan. By eliminating property taxes, we can attract businesses, retain residents, and create a fairer tax system that benefits all Michiganders. This transformative policy change has the potential to revitalize the state’s economy, improve the quality of life for residents, and ensure a sustainable financial future for Michigan. Visit AxMiTax.org for more information, to read the ballot initiative, and to support it.

Kate Astrakhan
Village of Manchester

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by Sara Swanson

Sara Swanson is an editor, writer and founder of the Manchester Mirror.