Taxes in
People choose a
place to live or open a business based on the costs and the benefits of
choosing that location over others. When people move they know how much total
per month they are able to pay. That total includes monthly mortgage principal
and interest, property taxes and income taxes. If your budget is $700 a month
for housing costs and you are looking at the
Plain and simple the city income tax makes Port Huron a poor financial choice for middle and upper income levels and a smart financial choice for lower income and landlords. Implementing the city income tax without changing other taxes has inevitably led to the lower per capita income and higher level of rentals that we have today.
Originally,
eliminating the city income tax was my first choice on how to revitalize Port
Huron and I explain how it can be done now in my article “Revitalizing Port
Huron” I wrote a year or two ago at the end of this response. I have since
learned about Stafford
One advantage to
eliminating property taxes over income taxes is that when incomes declines in
hard times like these so do your taxes if you are only paying income taxes. The
reason eliminating property taxes worked to attract so many jobs to Stafford
Texas is that companies with branches do not pay any income taxes where those
branches are located they only pay property taxes. Their employees pay the income taxes so the
income tax is not a factor in choosing where to locate a new branch only the
property taxes are. Companies like Google,
Apple, IBM, Engineering firms, advertizing companies etc. will find
Revitalizing
The current mortgage crisis
is causing a steep drop in home prices. While this is terrible news for many it
is also a great opportunity for
With the Baby boomer’s
getting older we are seeing a lot of
Rising energy prices also has
many negative affects.
So where do we start?
Step #1 Addressing
City Population Decline
1. Census data shows
2. Census Data shows
3. The surrounding area is
having population growth at the same time only the city with a city income
tax is having a population decline.
4. Other cities in
5. Not only is
6. Declining population and
declining average incomes results in a steady decrease in the local economy,
funding of local charities, declining water usage, depressed property
values and lower overall tax revenues.
7. Increasing the population
and average income will result in a steady increase in the local economy, funding
of local charities, increased water usage, increased property values and
higher overall tax revenues
8. Reversing the population
and average income decline that Port Huron has experienced the last
30 years will require attracting more above average income residents to
Port Huron than we lose each year.
9. Eliminating the City
income tax will eliminate one of the reasons people with higher than average
incomes do not choose
If we can eliminate the City
Income tax it will have a positive impact on
Hopefully we can all agree
eliminating the City income tax would be a good thing in the long run for
Hopefully we can all agree
that the sooner a good long term thing is started the sooner we'll see the
impact of that change.
So the only question
left is how soon can we eliminate the city income tax.
The proposed solution is to
start an immediate phase out of the city income tax. This will
send a clear message of our intent to do so now and the positive
impact of doing so can begin.
Due to the budget issue
The proposal:
1. Immediately eliminate
the city income tax for NEW residents and New Businesses.
2. Decrease the city
income tax on residents and non-residents working in
from 1.0% and 0.5%
currently down to 0.9% and 0.45% for 2008. Decrease again in
2009 to 0.7% and 0.35%.
This covers the current councils budget years. While I
would like to
continue the decreases into 2010 and 2011 until the city income tax is
eliminated, I
would understand if this council does not want to commit the next council
to these changes
similar to the automatic water and sewer increases.
The
Impact:
1. The $6,800,000 million in
current city income taxes would decline to $6,120,000 if all things stay equal.
This would be a decrease of $680,000 in revenue the first
year and would be made up for by:
A. The
city receives state revenue sharing based on population. A continued
decline of
400 people a year would be a 1.3%
decrease in state revenue sharing. If we can stop
the decline
and just maintain current population size that would avoid a 1.3% drop it
state revenue
sharing. In addition there are some people who currently do not claim
city residence so
that they can avoid city income taxes. A rough estimate would be
500 people do this and that would add
1.6% to the revenue sharing. Actually
attracting 400
more people than we lose each year would add another 1.3% to the
State Revenue sharing.
Hidden people =1.6% of $4,000,000 or $64,000/year.
Avoid losing people = 1.3% of $4,000,000
or $52,000/year.
Attracting new people = 1.3% of
$4,000,000 or $52,000/year
Turning the 400 person
decline into a 400 person increase would add $104,000/year with an extra $64,000
in found people the first year. This
additional revenue would repeat each year and increase by an additional
$104,000/year.
B.
Losing 400 people
a year with an average of 3.2 people per house means 125
homes a year are
no longer needed and will fall into blight and default on both
property taxes
and mortgages. This results in an immediate loss in property tax
revenues for
that property and income tax revenues from the landlord, realtor or
bank.
- If 60 of these homes
are $50,000 rentals and 65 are $50,000 homes that results in a
lose of (60 x $1,434.49) + (65 x $967.84) or $86,070 + $62,910 = $148,980/year
in property taxes if they are bought at the depressed $50,000 price
and the current taxable and assessed values were equal.
- If the 125 homes have
average water bills of $150 a year another $18,750/year is
lost.
- These 125 homes support
business that would otherwise not be needed. Another very rough estimate
is another $50,000/year in property and income taxes
along with water and sewer from business that go under.
- Depressed property values
from the market making up for the increased monthly cost of living in the
same house in Port Huron is roughly $4,000 to make the combined monthly
interest, property tax and income tax = to the same exact house with
the same millage rates and no city income tax. An increase in property
values of just $2,000 would add $378,000 to property tax revenues based on
homestead rates or $552,000 based on non-homestead rates. If 50% are rentals
the increase would be $495,000/year
Total from revenue loss
avoidance and added revenues from just stabilizing the population of
State Revenue Sharing $ 52,000 (if population decline is reversed
$168,000/yr)
Homes No Longer Needed $148,980
Business no longer supported $ 50,000
Water Bills still paid $ 18,750
Un Depressed Property Value $495,000
$764,730.
($880,730 if population decline is reversed)
In addition a home that is
bought instead of being no longer needed goes to a taxable value equal to the
assessed value where it may previously have been 10% to
20% below the assessed value. Eliminating the decrease in 1.6%, (125)
fewer houses needed due to population lose would mean 1.6%, (125) more
homes would turnover and be at the assessed
value. If the average taxable value on these 1.6% of the homes increases
10% that would add another $14,900 annually.
Other points:
New resident or business pays
property taxes at a taxable value = to the State equalized value. New
residents would be paying more in property tax than current residents on
average. This would off set the initial advantage over most current residents
who would be paying city income tax during the phase out period.
Increasing the number of
residents supports more businesses creating more local jobs. cha
Step #2
1.
Repeal Ordinance
requiring minimum percentage to be retail.
2.
Address high rent
and high vacancy rate:
Reward occupied open businesses with tax
relief.
1.
Business’s open
past 6PM 15% income tax refund.
2.
Business’s open
on Weekends 10% income tax refund.
3.
Business’s open
past 6PM 15% property tax break.
4.
Business’s open
on Weekends 10% property tax break
3.
Attract new
business and residents to downtown
a.
City income tax
credit up to total amount or $2,000 whichever is lower for the first 3 years of
residency in Downtown Port Huron.
b.
City income tax
credit up to total amount or $2,000 whichever is lower for the first 3 years of
business operation in Downtown Port Huron.
Step # 2 may not be needed as sales of unoccupied
downtown buildings has recently picked up since the casino vote failed.
If we choose instead to continue to do nothing now and
lose more population and have further decreases in average