Wednesday, May 27, 2009

A Bump in The Road

There was a commentary in the Journal today, May 27,2009 by Charles Chieppo and Joseph Giglio, "In Mass., user fees best way to pay for roads." In it, the authors advocate that people who use roads the most should pay the most for them and they recommend that we use electronic technology to charge people accordingly.

The authors write, "When it comes to roads, most agree that how much you pay should be commensurate with the benefits you derive."

I'm no professor or professional public policy writer but I do have some serious questions about their assumptions and suggestions.

For example, if the Johnson family drives every Sunday from Boston to Cranston to visit their elderly grandmother Mabel, exactly who benefits the most from the use of the roads, grandma Mabel or the Johnsons?

When the trucker delivers his load of fresh produce to the market is he the beneficiary of good roads or is it the market owner, or is it we the consumers, who benefit the most? It's pretty clear to me that good roads benefit everyone, just as do efficient police protection and fire protection and public education.

This is a poorly thought out idea, which is in fact, just another way to provide more revenue for cash strapped states. I agree that the revenue problem is serious and needs to be solved but let's not delude ourselves by pretending that this suggestion is in some way a fairness issue. It isn't.

There are those who see government as a necessary evil and others who see government as the answer to our problems. It is neither and it is both. Our task is to define, as carefully and precisely as possible, what role government should play in our lives.

Maintenance of public roadways and infrastructure is one of those roles and should be paid for with public funds. Our challenge is to guarantee that government spends our money wisely and with greater care and respect for the taxpayer.

Monday, May 25, 2009

Tax Exempt Property 101

There are many worthy organizations and businesses that do good works; churches, hospitals, universities and colleges and charitable organizations, all provide humane and important services and are rewarded with tax exempt status.

In such cases the property owned by these organizations and used in the performance of their routine functions are not taxed. Most agree that it is only right to provide support for these worthy organizations and the other businesses and residents, through their property taxes, pay the share of the tax exempts who also receive benefits such as road maintenance, fire and police protection, maintenance of public spaces etc.

Communities obviously vary in population, infrastructure, size, and industrial density.    Because of this, some communities are more attractive to tax exempt organizations. On July 21, 2008, Providence City Council President Peter Mancini, in a special section to the Providence Business News said "We’re almost at 50 percent tax-exempt real estate". This means that just 50% of the property owners are paying 100% of the tax levy - their portion and the portion of the tax exempts.

This is clearly unjust and unfair to the property owners of Providence and other towns with the larger percentages of tax exempt property.

One approach would be to charge fees to various organizations but it will produce ill will and resistance and some groups will always feel they have been unfairly and unreasonably taxed. There is a lot of push back to Mayor Cicillini's efforts to authorize new local taxes on private colleges, universities and hospitals.

And if the extra revenue is used to fill holes in the budget instead of being used to bring relief to beleaguered tax payers, they too will feel betrayed. This piecemeal approach fails to deal with the  underlying problem of unfair distribution of tax burdens.

It is for this reason that the following plan is offered for consideration.

The General Assembly shall determine the *percentage of tax exempt property that any community will be required to support.  For simplicity let's assume that percentage is 10%.  In this case the remaining 90% of the community will pay the 10% tax exempts' share, who pay nothing.

As the percentage of tax exempts increases they will begin to share in funding of the tax levy through a tax on their property according to the following simple formula:  Their property tax shall be a percentage of the standard property tax equal to the difference between the percentage of tax exempt property in the community and the 10% allowed by law.

For example, should a community actually have 16% tax exempt property each tax exempt property will be taxed 6% (16% minus 10%) of the normal tax on said property.  As the percentage of tax exempts increases so shall their contribution to the tax levy. If, as in Providence, the percentage reaches 50%, the tax exempts would pay 40% of the normal property tax an their property (50% minus 10%).

*The actual numbers used shall be determined by careful analysis so as not to be unreasonable to any of the involved parties while standardizing the process for all. The General Assembly can also provide for different rates depending on the nature of the organizations. Some might even remain tax free.

Wouldn't it be better to have a known and transparent system rather than what we have now, individual mayors and town councils working out a variety of different arrangements of PILOTS (payments in lieu of taxes) that vary from town to town, inconsistent and unpredictable? 

The taxes would be levied in a manner that is sensitive to the value tax exempt organizations bring to a community while not unfairly burdening others whose property is not tax exempt.

Maybe It's Just Me     

Monday, May 18, 2009

Time For And

In a recent Projo Commentary, "RI should stop trying to pick winners", a main theme was that markets are the best and most efficient way to determine whether policies are working.  A fundamental premise of markets is reliance on "cost benefit analysis to guide... policy".

To most of us, cost benefit analysis emphasizes the amount of money spent compared to the amount of money earned.  While this is undoubtedly important we must acknowledge that there are "costs" and "benefits" other than financial.  For this 'human' analysis, markets are not very good judges. 

The more conservative view places most of its faith in the traditional market view while the more liberal view emphasizes the human factors.

We seem to fight about which is the right view, the best view, and insist on EITHER/OR solutions.  We desperately need "AND" solutions. 

Saving money is important to commercial and residential taxpayers AND it's also important that we care for the needy and the homeless.

Good benefits and pay for union members are important AND it's important for taxpayers to be able to pay their own bills as well as for those benefits.  

For far too long this bipolar paradigm, that only one viewpoint is the right one, has stifled our potential and it's high time to stop this "either / or" battle. We can do better.  

Thursday, May 14, 2009


There has been a lot of print devoted to government ethics these past weeks. In particular, Sen. William Irons claims that his conviction is faulty because he is protected from the Ethics Commission probe by the Rhode Island Constitution's Section 5. "For any speech in debate in either house, no member shall be questioned in any other place."

This seems a bit odd to me, a non attorney, but isn't unethical behavior of most concern to taxpayers precisely where Mr. Irons claims it is no one else's business?

The solution appears to be that the Legislature investigate the case brought to its attention by the Ethics Commission. If it refuses, then it would fail to perform its duty under Section 4. of the Constitution, "-- No member of the general assembly shall take any fee, or be of counsel in any case pending before either house of the general assembly, under penalty of forfeiture of seat, upon proof thereof to the satisfaction of the house in which the member sits."

The Senate must take responsibility to police its own members.

Tuesday, May 5, 2009

Are They Limits or Targets?

The Rhode Island legislature has passed a law (S3050) requiring town tax levy increases to have annual limits gradually dropping to 4% by 2013.

This puts towns who have tried hard to limit costs in an awkward situation. If a town were able to hold the levy to a low or even zero percent increase for example, the following year's allowable increase will be based on that low levy. On the other hand, were the town to increase the levy the maximum, it would be entitled to the same percentage increase the next year but based on a higher amount.

A town which is conscientious in holding expenses can effectively be punished by that decision creating an incentive for the town to request more than it really needs, just in case. The limit becomes a target.

Wouldn't it better to amend the current law so that towns can "bank" the unused portion of any allowable increase? This amount of money could be made available to increase the limit in the event of a shortfall in a subsequent year, subject to certain restrictions and time limits upon application to the state. This could also reduce or eliminate litigation involved with a Caruolo action.

In this way a town could try its best to hold down taxes while not being punished in future years should real need arise.

But maybe it's just me.

Friday, May 1, 2009

OK to Lie?

In a recent Providence Journal article the writer mentioned legislation which a committee of the General Assembly would "hold for further study". It occurred to me that there must be hundreds of bills languishing in committee, being held for further study that never actually get further study. In fact, they lied.

They simply pat us on the head when we introduce bills through our elected representatives and senators, telling us, "Now, now, that's very interesting and we'll look into it, now go outside and play like good little children".

I believe that lying to a legislative committee is a pretty serious offense and can even get a president impeached. How come the committee can get away with it?

Maybe it's just me