Friday, October 1, 2010

When will we get it?

Rhode Islanders pay more in property taxes than 45 other states, according to a recent article in the Providence Business News. It is no small wonder then, that reducing spending is on everyone's to-do list.

But there is another issue than no one on Smith Hill seems willing to take seriously, an issue that has a much more profound effect on our property taxes - revaluations.

Let me say at the outset that we need to revalue regularly. In fact we should revalue every year instead of every three years, as we do now. Revaluation is the only way we can assure that when someone buys a $1 million dollar property they pay a fair tax on a $1 million dollar property.

But the impact on existing owners is anything but fair. To illustrate, let's imagine that we froze the tax levy in North Kingstown, so that in 2004 it was the same as it was in 2003. Rational people might expect that no one would pay any more in taxes. In fact, if it were 2003 instead of 2004, no one would have paid more in taxes.

But there was a scheduled revaluation in 2003 for the 2004 fiscal year. The result was that in 2004, 49% of the taxpayers would have received a tax increase averaging 23%! The total additional taxes paid by nearly half the property owners would have been just under $2.4 million dollars.

Since our scenario froze the tax levy, no additional money was received by the town. The $2.4 million merely offset the tax reduction of the other 51%. Does this seem fair to anyone? Does it seem reasonable to increase taxes for some people solely to lower other people's taxes? But that's what revaluations do.

It gets worse. The average property value of the people got the increase was $154,000. The average property value of those whose taxes fell was $228,000. People owning more modest homes paid millions to people with more valuable homes. What's wrong with us that we allow this to happen, over and over?

I performed this same revaluation scenario for North Kingstown's 2007 and 2010 fiscal years, Barrington's 2009 fiscal year, West Warwick's 2003 fiscal year, and Cranston's 2006 fiscal year with eerily similar results.

To repeat; towns can freeze budgets and hold levy limits to a zero percent increase and still, thousands upon thousands of tax payers would get onerous tax increases for no rational reason, simply because of a reassessment of property value.

So we face a dilemma; how can we tax existing owners fairly and, at the same time, tax new buyers fairly on the values of their purchases?

There is a way outlined on the Rhode Island Gets Honorable Taxation website. We can tax both existing owners AND new buyers fairly and reasonably, every year, fund levies as we do now, and eliminate assessment appeals for existing owners.

Only when we get this fixed can we expect real results from any tax decreases. Or maybe we just don't care care?