The Land Value Tax Plan Does Nothing for Racial or Economic Justice in Majority Black Detroit

January 15, 2024

The Land Value Tax Plan Does Nothing for Racial or Economic Justice in Majority Black Detroit

Detroit’s story of white flight and deindustrialization—a process that transformed the city into a majority Black city but also a city left to struggle for economic survival—is one rooted in structural racism and anti-Blackness. That is, Detroit was economically isolated from its white suburban counterparts in the region because it is a Black city.

Detroit’s first Black mayor, Coleman A. Young, who fully understood this reality, had to seek creative approaches to keep the “the lights on”. Throughout the 1980s, Mayor Young proposed a series of property tax increases to make up for dwindling city revenues. Time after time, majority Black Detroit agreed to these increases to pay for the city services and public institutions that anchor any thriving community. By the 1990s, Detroit had one of the highest property tax rates in the county.

Over the last 10 years, Detroit’s so-called economic resurgence is attracting the demographic of folks who once spurned Detroit.  They have returned to the city claiming space in and around downtown.  Suddenly, the sky-high property taxes that Black Detroiters have paid for decades to sustain the city now must be eliminated. New schemes like Neighborhood Enterprise Zones (NEZs) help to reduce the tax obligations for newcomers.

The most recent of these schemes is the Land Value Tax (LVT). The city administration has claimed it will make greedy land speculators pay more while reducing the property taxes for homeowners.

The reduction is achieved by splitting our property tax into two parts: 1) a building tax and 2) a land tax. Under the LVT we will be paying a tax on our house (or any physical structure) and a second one on our land. The tax on homes will be lowered and the tax on land will be doubled. Homeowners pay less in this deal because homes are valued much higher than land. In contrast, people with no homes on their land will end up paying more and will theoretically be footing the bill for the tax cut.

Confusing stuff, right? Don’t worry, you are not the only one.

Besides being confusing, it is also flawed. For starters, the LVT aims to leverage the assumed demand for vacant land to make speculators pay a larger share of the tax burden. However, if holding undeveloped land was that profitable, the Detroit Land Bank would not be sitting on 92,000 parcels. The demand is too low to compel speculators to pay more. It is more likely many speculators will simply walk away from the property. This will result in a significant decrease in property tax revenue and increased costs to the city as the Land Bank will be forced to absorb more abandoned properties leading to shortfalls to the general fund and subsequent cuts to city services.

The LVT won’t work because it fails to address the root problem of racism and underinvestment which created the high property taxes and/or allows land speculators to sit on undervalued land and pay little into the general fund. The LVT does absolutely nothing to address tax inequities rooted in racial or economic injustice.

If the administration really wanted to provide tax relief in a racially equitable way it could, right now, stop overtaxing Black homeowners. It could also get rid of the Downtown Development Authority (DDA), which gives $40 million a year in public money to wealthy, largely white Downtown property owners. Doing so would unlock $1 trillion in taxable value that could be used to repay Black homeowners the $600 million they were overtaxed while reducing property taxes throughout the entire city without risking a loss to services and revenue(1).

The LVT is currently stalled in the State legislature.  If passed by the State, the LVT will be placed before Detroit voters on general election November 2024 ballot.

Land Value Tax Citations

  1. (adjusted for 2024)