Saturday, May 28, 2011

"Risk? What Risk?"

The news has been replete with examples of requests for protections against risk.

Insurers, especially health insurers for example, want to minimize exposure and look for ways to reduce risk by being selective in those they insure. It's natural and understandable if they want to maximize income. The costs of such 'guarantees' are borne by their customers of course. People at greater risk pay higher premiums or maybe can't even get insurance.

Mammoth corporations whose demise could devastate the economy claim that they are too big to fail and maybe they are right. They too have requested and received guarantees in the form of  emergency TARP funds while smaller companies receive state, federal and local tax breaks to entice them into an area.

Oil companies justify their huge tax breaks by pointing out that they take enormous risks and deserve to be compensated for those risks. Meanwhile they have announced the highest profits in history.

The Providence Journal recently mentioned legislation to protect municipal bond holders in the event of bankruptcies (Friday May 27, Page A7 "Senate approves bill on municipal bankruptcy"). Reducing the risk of buying bonds would help access to credit markets, it is believed.

What do all these have in common?  Risk. They are all efforts to reduce the inherent risk involved in what is, in many ways, gambling.

However, when the risk takers can reduce risk through various tax incentive programs, the people who provide those incentives with their tax money have a right to share in those huge profits that result. Those people however are struggling today, while the profits of the largest corporations and their executives' compensation packages have never been greater. There is something wrong with this picture.

The far right in this country howls that free enterprise is at stake, our very capitalist system is in danger if people, through their government, claim some of those profits. They characterize such efforts as harmful and suggest that companies will stop creating jobs, that rich people will move to places that don't require them to share those unheard of profits.

Sorry folks.  If corporate America accepts the people's money to help them reap historically high profits, then those corporations and their stockholders owe part of those profits back to the people who made it possible.

To be completely realistic one must acknowledge that special interest influence is not limited to corporate interests. Big labor has become what they were founded to counteract, just another group interested in only their own welfare.

Maybe it's just me.

Tuesday, May 10, 2011

"Tax Exempt Property"

From the RIGHTTAX website

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 is 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 which also receive those benefits of 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 plus the portion of the tax exempts.

This is clearly 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 produces 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 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 require municipalities to determine the percentage of the total assessed value represented by tax exempt property hereafter referred to as 'favored' property.
  •     Favored properties shall pay a percentage of the standard property tax equal to the percentage determined as above.
  •     For example, if the total value of favored property is 14% of the value of all property then the tax on 'favored' properties shall be 14% of the normal tax. 

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?

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.

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 could even remain tax free.