Tuesday, August 26, 2008

Dublin, Detroit, and taxes

In April, the Free Press pointed to Pittsburgh for lessons on how the city of Detroit could revitalize itself. This week, Ellen Creager looks farther afield to Dublin. In a nutshell, Dublin went from bust to boom by slashing corporate taxes and investing its E.U. subsidies in education. Unfortunately, as the author repeatedly acknowledges, those lessons mean little for Detroit beyond the obvious (businesses like low taxes, and a better-educated workforce is, well, better) because the parallels between the cities are so few.

If there's a real lesson to be drawn, it's that Detroit needs to overhaul its tax system, which is currently caught in an unforgiving loop. As more residents leave, revenues decline, leaving fewer people left to pay for city services. To balance the budget, the city makes further cuts to services and is forced to raise fees, sending yet more residents fleeing, and forcing another round of belt-tightening and/or tax-raising.

This is obviously unsustainable. At some point, the city must find a way to lower its taxes -- especially the much-hated city income tax -- but it can't do so without an alternative source of revenue to compensate for what will initially be a serious drop in revenue. For now the city and county seem to hope that new tax incentive programs, like Land Bank T.U.R.B.O., will be sufficient to jumpstart new development.


TimChi said...

As Michigan attempts to solve Detroit's woes, it's important to take a look at other successful city turnarounds, taking bits and pieces from every success story.

The lesson to take away from Dublin is that their Luas line public transit system provides an easy way for suburbanites to get downtown and spend money on Grafton St, thus keeping business operating, even thriving, in the city center.

But overall, Dublin might not be the best role model. In fact, Dublin still faces most of the same problems Detroit does -

Aside from Grafton St., head north of the Liffey and Dublin is filled with impoverished eastern European immigrants. Most "Dubliners" live in extraordinarily overpriced suburbs, and as the bubble bursts on their housing market, Dublin's middle class is drowning in debt.

So what we can learn from Dublin might not be in tax incentives or education (both of which are important, of course), but in viable public transit to first get suburbanites downtown, in the hope that some will relocate to the area and turn Detroit into a walkable city, with dining, shopping, entertainment, and even a grocery store.

Marisa said...

I read the second page of that article when I was at home (it was open, but flipping newspaper pages? too hard). I thought it was kind of ridiculous. Blah blah Dublin oh wait Detroit isn't like that.

Cooper said...

1. You clearly know more about Dublin than I do; we need mass transit.

2. The Free Press should publish one every week: "What Detroit can't learn from [insert city] and why!"

Yet my inner economist couldn't resist the chance to talk about taxes. Who have I become?