Wednesday, February 22, 2006

Tax Levy Limits. Good? Bad?

You have a headache. Take aspirin for the pain and it goes away - for a while. What if the headache comes from a tumor?

Taxes are the symptoms of budgets, not the cause of them. Taxes are how we pay for the government services we expect.

What if the spending levels are not in agreement with the services for which we pay? Do we just take it on the chin year after year?

What if education spending is near the top of the nation but student performance is near the bottom third in the nation?
What if our taxes are among the highest in the nation but our infrastructure, roads, bridges, are sub par?

I suppose one can make a case for saying "No more taxes, We've had enough".

Let's institute tax levy caps.

Tax burdens will be lowered for the property owners. That's a good thing, right?

But government needs to produce services and, unlike a company which must compete or sink, it will always be there and go to the people for money, in one way or another.

When the property tax revenue is limited (Prop 13, Prop 2 1/2) governments will find other sources - increased user fees, more taxes on other things, higher sales taxes, bonding with associated debt, or else services will deteriorate.

Both Massachusetts and California are at their pre-legislation levels in spending, only the revenue sources are different. Tax payers, the people, must take the money from a different pocket, that's all.

One also needs to ask if property owners, as a group, are generally more affluent than those who don't own property. Intuition suggests that this is indeed true.

If so, then lowering the tax burden as a whole for the property owners will move the burden to non-property owners. This shift is not in the overall best interest of the state and is likely to be counterproductive.

The only fair measure would be to place realistic limits on SPENDING, both at the state and local levels. Limits are not created in a vacuum, and to be truly effective they should not be arbitrary and fixed, but respond to and reflect the economic realities of the times.

Any limit must be indexed to some agreed upon benchmark and be subject to periodic adjustment both in terms of the benchmark and the indexed amount.

Nothing else makes much sense and, in the long run, could merely postpone the best treatment until the patient actually dies.

Maybe It's Just Me.

Monday, February 20, 2006

How to eliminate poverty

There is much written about the relationship of poverty to education. It can be easily demonstrated that poverty and education are inversely related, thus the reduction of poverty is a worthy goal.

However, we cannot reduce poverty by giving money to the poor and/or poorly educated.

Instead, may I suggest that only when people wish to become educated and demonstrate a willingness to pursue knowledge can we have any hope of reducing poverty.

The goal isn't how to find more money for the poor. It is how to inspire the poor to value education and in this way lift themselves from poverty in the only sustainable way, by determination and hard work.

Anything else is a pipe dream.

But maybe it's just me.

Tuesday, February 14, 2006

The Recall Option - Democracy or Intimidation?

At the North Kingstown town council meeting on February 13 there was discussion of adding recall to the town charter.

It is not currently legal for a group of citizens to require a recall election. Councilor John Patterson has suggested that the Council request the Charter Commission explore the possibility of recall and report back to the Council for discussion and a vote. Councilor Mark Zaccaria opposed the recall proposal for several valid reasons, all of which must be considered should recall become a reality. Councilman Ed Cooney offered that a two year term instead of the current four year term might be a solution.

Recalling an elected official must not be so easy that petitions become frivolous and personal - (elections cost money to the tax payers). Elected officials must be able to do what they believe is best for everyone without fear of being targeted for recall by a special interest group. The requirements for a recall petition should insure that recall is done only under the most dire circumstances.

A shorter term might be counterproductive since, as Mr. Bill Mudge pointed out, it does take time to learn about the job before one becomes truly productive and effective.

On the other hand, if citizens believe that an elected official is not performing in the best interests of the people or is an impediment to the performance of the committee on which he or she serves, is it not their right, their duty, to remove that individual? Wouldn't it be nice if all candidates could be rated as to their qualifications to serve on the committees for which they seek election before they are elected?

Democracy can be dangerous if the majority of those who vote have very narrow interests, or are ill informed on the issues or the candidates themselves don't have the qualtites needed to effectively discharge their very serious obligation to the people .

But maybe that's just me.

Sunday, February 12, 2006

Taxes: Part Three

In the previous two post I have tried to outline the problem as I see it and to explain why the limited view of addressing only the total tax levy (a problem which I freely acknowledge needs to be rectified) will not trickle down to the people who pay taxes every year as one might hope.

In this part I will propose a new view, one which I believe can address the issue by producing a fair tax distribution without the problems associated with relying on a local income tax as some suggest. So here goes:

This is NOT about preserving bloated budgets; it is not about good guys versus bad guys, businesses versus homeowners, assessors versus taxpayers.

It is about fair taxes, it is about changing the painful consequence of apportioning local taxes using a system that appeared long before the industrial revolution. In those ancient days property was valued according to the income it produced, not the real estate market.

In fact, newly uncovered tablets relating to local ad valorem taxes date back to 5000 B.C. yet we still pay for local government the very same way today!

R.I.G.H.T. (Rhode Island Gets Honorable Taxation) proposes a different distribution method. One that recognizes two types of property owners: (1) people who are existing owners and taxpayers and (2) those who are new owners, through buying or building.

Existing property owners would pay taxes by linking each individual's tax increase directly to the budget increase regardless of changes in their property's value. Everyone will share fairly in the changes in tax burdens. No longer will some owners receive huge tax increases while others receive huge decreases based solely on swings in the marketplace.

At the same time, the new owners in their first tax year, will pay a fair share of the tax burden using standard ad valorem taxes. It is nearly identical to the current system except the tax rates and assessments are always up to date instead of one, two or three years old. The following year, new owners become existing owners and pay their fair share of taxes in the same way that all existing owners are taxed.

Habits are hard to break. But unless and until we understand the structural flaws in an outdated ad valorem system of apportioning all local taxes on property values, no amount of budget cuts, by themselves, will get to the very heart of the problem we face year after year - the unfair distribution of local tax burdens.

Rep. John Loughlin II is one of the sponsors of the legislation that will make property taxes truly fair. Please contact him or contact us here at R.I.G.H.T. for more information. And please, contact your legislators and let them know how you feel.

I have created a presentation that takes about 20 minutes and explains this in much greater detail. I would be pleased to discuss giving the talk to interested parties.

The American Industrial Revolution started here, in Pawtucket, RI in 1793. It is only fitting that the property tax revolution starts in Rhode Island as well.

Saturday, February 11, 2006

Taxes: Part Two

If we ignore the underlying inequity of distribution, whether it be of food consumption or taxes, we will fail. Fair distribution of taxes is the bedrock on which this nation was founded.

In North Kingstown the 2004 tax levy rose just 3.8% over 2003. For the largest group (70%) of homeowners, in the $75,000 to $200,000 range, the 2003 revaluation increased their average 2004 tax bill 19% over their 2003 taxes, five times more than the tax levy increase.

At the same time, another group (25%) of homeowners, in the $200,000 to $500,000 range, received an average increase of just 3%.

If we try to solve the increased tax problem for the majority by merely cutting the budget and eliminating the entire 3.8% increase, note what happens.

The first group, the ones with the 19% increase, would receive a reduction. Their bills would now average 15% above their 2003 bills, still high considering there is no tax levy increase.

But second group of owners, those in the $200,000 to $500,000 range, would actually see their taxes DROP below their prior tax bills! The majority of homeowners gets a hefty tax increase, while others get a tax decrease, and there has been no change in the tax levy. Some property owners, those with the most expensive properties in the city, will have received reductions of over 27%!

If the goal of a budget cut is to relieve beleaguered tax payers, it sadly falls far short of that goal.

We'll offer a suggestion for fair taxes in part three.

Friday, February 10, 2006

Property Taxes 101

This will be a multi-part entry so come back to read it all. I have submitted it to several newspapers but this is for those who might not see it.

Real Property Tax Reform
For a Change

The gauntlet has been thrown. We're spending more than we can afford and change is in the air.

There is little disagreement that Rhode Islanders pay among the very highest property taxes in the country. The budget is the enemy and solutions always point in the same direction; spending limits or budget cuts.

Now, I'm no fan of wasting money and it does make sense to lower budgets; we often spend too much for what we receive. But the larger question, the one always ignored, is whether limits on spending, by themselves, will produce the results we expect and deserve – fair taxes for everyone.

To help answer that question, look at a familiar national problem - obesity.

Americans consume more food per capita than any other people in the world. We, especially our children, are heavier than ever, and diet related illnesses like diabetes and heart disease are rampant and getting worse.

Simplistic answer – cut the food available, everyone reduces food intake by a certain amount and everyone loses weight. Mission accomplished? Problem solved?

Obviously not. While obesity certainly is a national problem, there are people in America who are hungry and don’t get enough to eat. The ‘simple solution' would require these folks as well, to lower their consumption which is already too low.

The issue is clearly more complicated. While total consumption is a problem, an even more important problem is distribution. Unless we deal effectively with the distribution problem, any solution targeting only the total consumption is doomed to fail.

To be continued...

Wednesday, February 1, 2006

Muslim outrage at Denmark

The image of Mohammed appeared in a Danish publication in a satirical manner a few days ago. Islam forbids images of the Prophet Mohammed. The outrage in the Arab world was instantaneous and universal. Sales of Danish goods in all Arab countries fell to zero.

There were demonstrations in the streets and the Arab people were united in their condemnation of Denmark. They have sworn to boycott anything Danish.

Wouldn't it have been great to see such widespread and passionate outrage against the barbarism of Muslim fanatics like al Qaeda and Osama bin Laden? Mainstream Muslims say they reject terrorism but their response has ranged from tepid to none - certainly a stark contrast to the outrage against one Danish publication that printed an image of Mohammed.

It would seem to me that Arab national priorities need to be re-examined

Maybe it's just me.