Thursday, January 20, 2011 abatements, middle income housing, and crime

In a comment, somebody suggested that we research the effect of tax abatements on local development. As many know, Toledo offers tax abatements for those who purchase luxury condos downtown. It is obvious that these tax abatements have encouraged the redevelopment of several downtown buildings, but it is unknown how much these tax abatements actually encourage people to move downtown, and if there has been any benefit to the local economy from them.

In my research, I stumbled across this article which posits that since most tax abatements only benefit those who earn at the extremes, they do not benefit the majority of the population. Most tax abatements either benefit high-income professionals or low-income earners. This leaves out the largest group, the middle-class (whether the middle-class is disappearing is a debate unto itself). This article discusses how Philadelphia builders are now building affordable housing for the middle-class, which is relevant to us because housing is apparently affordable in Toledo. Therefore, I doubt it is necessary for Toledo to concentrate on building more affordable housing, especially for the middle-class. That said, what is the point of these tax abatements in general if they do not benefit the largest portion of the population? One would think that the economy would benefit most from giving benefits to the majority of people.

Assuming that these tax abatements encourage development, this article raises a very interesting point. While these tax abatements may actually cause development for high-income professionals and low-income workers, what is the worth of this development if nobody is taking advantage of the abatements. This article mentions that city planners often don't take crime into account when deciding to allocate these abatements. Indeed, I know several people who moved to downtown Toledo, and many have left, and those who haven't yet want to, because they will lose their car insurance if their cars get broken into anymore. Would not more people move downtown if these tax abatements did not exist, and the city could use the money they would otherwise collect to hire more police officers to ensure these areas are safe? It seems that safety weighs heavily on the minds of consumers.

I guess my overall point is that tax abatements could most benefit the economy if they are given to the middle class. At some point, the rich stop spending and start saving. The middle class tend to spend more of a percentage of their income. If we give them more to spend, it seems we could increase the amount of consumption in the area, and more money would turnover locally, creating a more pleasant environment for local businesses and consumers. Either that or we could eliminate tax abatements altogether and simply lower taxes for the middle-class. An aside...I think there is a need for tax abatements for low-income housing.

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