Taxes: Part Two

If we ignore the underlying inequity of distribution, whether it be of food consumption or taxes, we will fail. Fair distribution of taxes is the bedrock on which this nation was founded.

In North Kingstown the 2004 tax levy rose just 3.8% over 2003. For the largest group (70%) of homeowners, in the $75,000 to $200,000 range, the 2003 revaluation increased their average 2004 tax bill 19% over their 2003 taxes, five times more than the tax levy increase.

At the same time, another group (25%) of homeowners, in the $200,000 to $500,000 range, received an average increase of just 3%.

If we try to solve the increased tax problem for the majority by merely cutting the budget and eliminating the entire 3.8% increase, note what happens.

The first group, the ones with the 19% increase, would receive a reduction. Their bills would now average 15% above their 2003 bills, still high considering there is no tax levy increase.

But second group of owners, those in the $200,000 to $500,000 range, would actually see their taxes DROP below their prior tax bills! The majority of homeowners gets a hefty tax increase, while others get a tax decrease, and there has been no change in the tax levy. Some property owners, those with the most expensive properties in the city, will have received reductions of over 27%!

If the goal of a budget cut is to relieve beleaguered tax payers, it sadly falls far short of that goal.

We'll offer a suggestion for fair taxes in part three.

Property Taxes 101

This will be a multi-part entry so come back to read it all. I have submitted it to several newspapers but this is for those who might not see it.

Real Property Tax Reform
For a Change

The gauntlet has been thrown. We're spending more than we can afford and change is in the air.

There is little disagreement that Rhode Islanders pay among the very highest property taxes in the country. The budget is the enemy and solutions always point in the same direction; spending limits or budget cuts.

Now, I'm no fan of wasting money and it does make sense to lower budgets; we often spend too much for what we receive. But the larger question, the one always ignored, is whether limits on spending, by themselves, will produce the results we expect and deserve – fair taxes for everyone.

To help answer that question, look at a familiar national problem - obesity.

Americans consume more food per capita than any other people in the world. We, especially our children, are heavier than ever, and diet related illnesses like diabetes and heart disease are rampant and getting worse.

Simplistic answer – cut the food available, everyone reduces food intake by a certain amount and everyone loses weight. Mission accomplished? Problem solved?

Obviously not. While obesity certainly is a national problem, there are people in America who are hungry and don’t get enough to eat. The ‘simple solution' would require these folks as well, to lower their consumption which is already too low.

The issue is clearly more complicated. While total consumption is a problem, an even more important problem is distribution. Unless we deal effectively with the distribution problem, any solution targeting only the total consumption is doomed to fail.

To be continued...

Muslim outrage at Denmark

The image of Mohammed appeared in a Danish publication in a satirical manner a few days ago. Islam forbids images of the Prophet Mohammed. The outrage in the Arab world was instantaneous and universal. Sales of Danish goods in all Arab countries fell to zero.

There were demonstrations in the streets and the Arab people were united in their condemnation of Denmark. They have sworn to boycott anything Danish.

Wouldn't it have been great to see such widespread and passionate outrage against the barbarism of Muslim fanatics like al Qaeda and Osama bin Laden? Mainstream Muslims say they reject terrorism but their response has ranged from tepid to none - certainly a stark contrast to the outrage against one Danish publication that printed an image of Mohammed.

It would seem to me that Arab national priorities need to be re-examined

Maybe it's just me.

Ford's Solution to Competition

So Ford is losing market share to the Japanese. Seems the Americans prefer Toyotas.

Does Ford announce that they are going to build a better car? Nah.

They decide to fire 30,000 workers. Perfect!

But maybe it's just me.

It's an ill wind that blows no one any good.

When I was much younger, that saying never made any sense to me. I have subsequently learned that it means that even what we at first might think of as a tragedy might have some beneficial outcome or result, that a purely "ILL" wind is pretty rare indeed.

Disasters, even of the scope of Katrina and 9/11, have brought people together, people who might never have been able to work together before.

In Rhode Island we face a looming fiscal crisis. The numbers don't lie and the handwriting is clearly on the wall for anyone to read. Taxpayers are simply unable to sustain the yearly increases in tax burdens being placed upon them. It's no secret. People are fleeing the state and the most vulnerable are often forced to sell their homes. Even a cursory examination of the data available at the Rhode Island Public Expenditure Council's website will quickly confirm it. RIPEC.

So we find ourselves struggling with ways to lower taxes, to make living here more affordable. Who would deny that this is a worthy goal? And yet we get resistance from unions, advocates and entitlement program administrators, in short, anyone who depends on our tax dollars, who worry that important programs and benefits might be cut. These are legitimate concerns and need to be addressed as well.

But there reaches a point when the goose runs out of golden eggs. I hope that it won't take a tragedy to get all of us working together to find ways to make our tax dollars go farther and do more than they do currently. We can have the quality of life we want and pay for it too but we must step back and question "business as usual".

For example:

Do we actually need 39 different fire departments? 39 different school administrations? 39 different health insurance contracts? Or is it that we've gotten used to them, that we just WANT them because they're familiar?

Is this the best way to spend taxpayers' money? Might there be a better way?

We have a long way to go and the work will be hard, but boy, it will be well worth it.

But maybe it's just me.

A fine state indeed

I have been privileged to participate in a meeting convened to discuss the direction Rhode Island is going especially as it relates to spending. It was painfully clear from the data supplied by RIPEC that the current rate of spending, at all levels is, in a word, impossible.

It doesn't take a rocket scientist to know that as long as outgo exceeds income we are on a collision course with disaster.

The most obvious solutions traditionally focus on how to cut the ever increasing spending. Some facts: (from Lookout TV show January 6, 2005

Third highest spending on total welfare ( averaging $50,000 per family)
Among highest percent of people on welfare.
Seventh highest in education spending
Bottom third in student performance nationally
From 1996 - 2004 40th in getting people off of welfare, among the worst in the country
By 2010 25% of all children will qualify for welfare
By 2010 20% of everyone will be eligible for state aid.
Reimbursement for medical providers are among the lowest:
Low md's pay
Low nurse pay
Low prescription payments

At our meeting it came as no surprise that the most frequently mentioned solutions included:

Cut spending
Force more efficiency
Tax limits to force the above and then
Cut spending some more.

These are indeed necessary. But in the longer view we need to decide on the long range goals.

So I ask the following: Is it enough if we:

Lower cost for education
Lower costs for municipal spending, fire, police, roads etc.
Increase productivity, increase output per employee.
Cut spending on entitlement programs, AFDC, Medicaid, RITE Aid etc.
Force cuts by tax limits?

Is it enough that we have lower spending on education and all the rest? I believe it will be a Pyrrhic victory unless we also:

Make this the best state it can be, not just the least expensive
Have the best educated people. I'd be proud to spend the most on education IF we also had the best students in the country.
Have excellent infrastructure, roads, bridges, and how about putting up enough street signs to help visitors navigate? etc.
Reduce not only spending but dependence on welfare, with compassion.
Have a legislature that will not be deterred from doing the people's business by getting "Abramoffed".

To succeed, we must include in the effort, the recipients of our tax dollars as well as the producers of those tax dollars so that, working together, we can send this message to the legislature - "Listen to the most important 'special interest group' of all, the people of Rhode Island"

Teachers
Firefighters
Police
Municipal
Business owners
Town managers
Taxpayer groups
League of Cities and Towns
Citizen advocates.

United we can thrive, divided we shall fail.

But maybe it's just me.

An American Taliban

The latest comment by Pat Robertson is beyond belief. His attitude is precisely the same as the narrow minded Neanderthal thinking of the fundamentalist Taliban. Only the name of their 'god' is different. Below is a copy of an email I sent to channel 12 which broadcasts the 700 Club every morning:

I have always questioned your decision to broadcast a show with a religious agenda such as the 700 Club. This last outrage from Mr. Robertson is the last straw.

I know that it will not mean much to you but it means something to me. I shall not watch Channel 12 again as long as this bigoted program is broadcast by your station.

I'm only one person but one has to do what one feels is right.

Society = One person at a time.

Harvey Waxman

"It's for the kids". Yeah, right.

This morning's Providence Journal reported a sad fact. Education Week gave Rhode Island a "D" in resource equity and an overall grade of "C", among the lowest in the country for its education system. Shame. What's worse is that this is nothing new. Since I have been talking about property tax reform for the last five years these numbers have changed little if any according my research.

Leadership on both sides, management and employee, legislators and unions, have to stop spending all their time arguing money issues ( we already spend among the most in the country on education ) and begin to concern themselves with performance and attitude.

Only then will the claim "It's for the kids" mean anything.

But maybe it's just me.

Is it a tax incentive or a bribe?

Bribe: make payments in exchange for favors or influence.

When we provide tax incentives to certain companies to entice them to locate here in Rhode Island, are we being fair to other businesses in our state? I don't see much difference between those incentives and bribes. Don't they both try to influence behavior that otherwise would not take place?

Our entire tax system, federal, state, and to a lesser extent local, appears to be riddled with influence peddling.

Maybe it's just me.

Property Taxes and Obesity

The accepted treatment for property tax anguish is to try to lower tax levies. We can do this by reducing budgets or increasing revenues. It's simple math. But does reduction of the tax levy accomplish the goal of 'fixing' the most hated tax in America? (Google the 'most hated tax' and see for yourself).

Allow a small comparison. We have an obesity problem in America. In Rhode Island for example, 56% of the public is either overweight or obese. (CDC 2004). Now that's a problem for sure. Using the logic of the property tax solution, we would simply require that everyone reduce their food consumption by some amount, say 10%.

But what about the people in Rhode Island that aren't getting enough food as it is? Should they too reduce their already inadequate food intake? Clearly not. The solution ignores the obvious fact that the distribution of food is at least as important as the total consumption.

Likewise, the distribution of the property tax is more important to the individual tax payer than the total tax levy. The 'deadly duo' of revaluation and ad valorem taxes ignores this issue and is creating a devastating imbalance in the burdens of property owners. Believe it or not many property owners (most often the larger corporations) receive tax reductions as budgets increase due to unfair distribution resulting from the revaluation process.

Budgets are too high and should be lower. In many cases we are not getting the results we deserve from our 'highest in the nation' taxes. But any budget, low, high, or just right, should be distributed in a fair manner.

We have one suggestion on our website, that we believe will do just that. Take a look and then post your comments here. I'd like to know what you think.