Michigan’s largest city, Detroit, is a case in point. From 1980 to 1994, the city of Detroit lost 17.5% of its population while its immediate suburbs grew by 4.1% (130,000 people). Thus, Detroit’s share of the region’s population fell from 27.4% in 1980 to 23.0% in 1994.
Detroit’s own public policies make it difficult to retain businesses and people. For example, the number of city employees fell from 22,000 to 19,000 from 1980 to 1991, but the number of city employees per 10,000 residents increased 3.3%. This meant that a smaller residential and commercial tax base was supporting a larger government relative to its population.
At the same time, residential property tax rates in Detroit are high, even for large cities. A comparative study of 51 large U. S. cities conducted by the city of Washington, D.C. found that Detroit had the 7th highest tax burden with an effective property tax rate 76% higher than the other cities in the comparison. Detroit’s tax burden is also significantly higher than its neighboring suburbs.
Detroit is not the only Michigan city that discourages development with high levels of taxes and spending. A Mackinac Center for Public Policy study of Michigan’s 11 largest cities found that while overall spending for the cities fell from 1980 to 1990, average spending still exceeded national averages for six of them. The study found that growing cities had lower taxes and spending per capita than did the declining cities. "We believe," the authors concluded, "that the evidence shows that high taxes and spending are both a cause and consequence of urban decline."
Taxes and higher spending are not the only hindrances to revitalizing Detroit and other big cities. Detroit’s violent and property crime (or "serious" crime) rates are surpassed only by Baltimore among the nation’s 20 largest cities.
In fact, the number of serious crimes increases as people move closer to central cities such as Detroit. Statewide, the number of serious crimes per person is almost double in central city counties compared to rural counties and almost 70% higher than in suburban, or "collar," counties (see Chart 12).
Detroit also discourages entrepreneurs by piling on a mind-numbing array of regulatory obstacles and barriers, from licensing restrictions to highly politicized planning reviews of new projects. The Washington, D. C.-based Institute for Justice identified numerous obstacles to starting up relatively low-tech businesses in Detroit, including caps on the number of taxicabs, excessive licensing and education requirements for businesses such as child care and hair-braiding, and zoning rules that prohibit virtually any form of home-based business. One recent Detroit-based project required approval from 22 separate bureaucratic "stakeholders" before it could proceed.
Finally, poor schools are another important "push" factor sending residents out of Detroit and other large central cities. Though recent charter school initiatives in Michigan have created a more competitive environment, most children in the government school system still have few high-quality education options.