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.

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