Wednesday, June 14, 2006

The RIGHT tool for the job

Please forgive this paraphrase an old expression, “If the only tool you have is a screwdriver then everything will get . . .”. Well you get the idea.

Our property tax problem is a little bit like that. It appears that the only tool or remedy anyone ever proposes to fix the most hated tax in America is to control or cut tax levies. Prop. 13 in California, Prop. 2 1/2 in Masachusetts, the proposed TEL here in Rhode Island, are all such examples.

At first glance it seems like a reasonable approach. After all, the reason we have a property tax in the first place is to help fund the tax levy, that portion of the municipal budget not covered by other revenue sources such as state reimbursement from income and sales taxes, parking tickets, fees, such as dog licenses etc.

Since we all share in the services provided by our towns, we should share in the tax levy needed to provide them. Thus the efforts to lower those total expenses would appear to be a rational and fair way to reduce the tax burdens on property owners. And it would be, if we each paid our fair share every year.

We used to many years ago. We paid taxes based on the value of our property. Then someone noticed that properties were increasing in value and people were buying homes at ever increasing prices yet paying taxes based on the older values.

The solution? Revaluation. This way, the people who were paying those high prices would be taxed on the fair market value of the houses they were buying.

But, we revalued everyone. That meant that there were lots and lots of people who found themselves living in homes that were getting more and more valuable. Their taxes were climbing faster than their incomes, faster than inflation, faster even than budgets.

Folks were finding it hard to keep their homes. Indivdual tax bills were being driven, not by the needs of towns, but the real estate market.

After a typical revaluation about two thirds of the people get huge tax increases but the remaining third were getting tax decreases! Clearly not everyone was paying their fair share.

And those decreases were going to primarily commercial owners whose property values weren’t rising as fast as the homeowners, so owners like Home Depot and Wal-Mart were getting large windfall reductions on the order of 15-25% while owners of the most modestly priced homes were getting increases of from 11-13%. These numbers are for North Kingstown after its last revaluation but are pretty typical. Not exactly a fair distribution, is it?

Any marketplace, no matter how well regulated, is at its core, a gamble. There is simply no justification for using marketplace gambling as a basis upon which to tax our citizens for the municipal services we receive.

Our website offers a different approach, another tool, to use in this battle against the most hated tax in America, the Property Tax.

Take a look and share your thoughts.

Click on RIGHT for the website.

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