Latest talk on Property Taxes

Last night I spoke at the North Kingstown Senior Center, sponsored by the Democratic Town Committee. What a wonderful experience for me and I learned from them as I hope they learned from me. People were enthusiastic and eager to talk about their impressions and experiences with the recent re-valuation and their new assessments.

Many had their individual horror stories and each one deserved to be heard. Unfortunately I was not the one to hear them as I can do nothing about those matters individually.

As the people who attended last night now know, my position is that these types of issues, incorrect data on field cards, unrealistic estimates of resale prices, inconsistent valuation increases within the same neighborhood, and odd reductions for some of the most valuable properties as levies increase, are all issues that should never again be of concern to property owners. It is most bizarre

I suspect we all want pretty much the same things: a home in which we can afford to live over the years, an education system on a par with our spending, quality services at reasonable cost, and a distribution of those costs fairly for everyone.

How do we stack up? Not very well.

Our property taxes are among the highest in the nation (most of those dollars are for education), student performace lags behind the most of the country, and infrastructure that leaves much to be desired. We are not getting full value for what we are paying.

Add to that the unforgivable fact that about two thirds of property owners shoulder the full burden of tax increases PLUS an extra amount to compensate for the tax REDUCTIONS received by the other third of property owners whenever there is a revaluation.

Until 2000, communities would revalue property every ten years or so. Some communities did so far less often than that.

This meant that as a rule everyone would share equally in tax increases; a 4% tax increase meant a 4% increase in everyone's tax bill. Usually.

While existing owners generally believed that they were paying their fair share, property was increasing in value. This meant that new buyers, willing to pay higher and higher prices, were paying taxes on prior values, thus, less than their "fair share".

The simple solution to this was to revalue all property and tax everyone according to the resulting tax rate.

In fact a revaluation does indeed produce a tax rate which taxes new buyers fairly. However, in the process, the new tax rate taxes all existing owners unfairly. Most owners wind up paying too much and the rest don't pay enough. Do you think this is a good trade?

We can correct this. To see how, you can visit the website. You will also be find a link to your legislators. Contact them and let them know that this is an issue that concerns you. That you want it to be explored, debated, discussed and FIXED!

Rep. John Loughlin II has drafted legislation that will modify the General Laws to permit us to make the distribution of property taxes fair for everyone.

RI Constitution Article 1 Section 2, "...and the burdens of the state ought to be fairly distributed among its citizens"

It really is up to us.

But maybe it's just me.

ps. Feel free to post a reply here. Maybe we can use this as a forum to share ideas. Thanks

So you think a limit on the tax levy is enough? You're wrong my friend.

The property tax cap legislation recently passed by the General Assembly effectively addresses an important loophole in the previous 5.5% tax cap. ("New property tax cap raises concerns over budgets across RI", Providence Journal, front page, March 6, 2007)

Prior to this legislation, a community could apply the 5.5% cap to either the amount of the tax levy or the tax rate itself.

For example, imagine that a town's total valuation rose by 30%, a very modest increase in today's climate of rising property values. Since the formula for calculating a tax rate is the levy divided by the total valuation, a town could apply the 5.5% limit to the rate, raise the tax levy by up to 30% (same as the value), the tax rate wouldn't increase at all so they would be under the 5.5% limit!

This is no longer possible under the new legislation which closes this huge loophole and even reduces the cap in stages over the next six years to 4%. NOTE: There is no limit to the amount your tax bill can go up!

There are important considerations however, which remain unaddressed. The first is the same one that characterizes both California's and Massachusetts' property tax solutions; the tax limit is arbitrary and fixed, while inflation and the economy, two main drivers of budgets, are not. In times of low inflation, the 4% limit could actually be too generous and by the same token, when inflation is greater than 4%, as it was in the recent past, it will be unrealistic to require such a limit on town spending increases.

The second, (in my view the more important) problem is that this solution fails to consider the most critical factor in an individual's property tax bill, the property value. Traditional revaluation produces increases in tax bills for about two thirds of property owners but it produces decreases for one third. This means that regardless of any changes in the budget, most of the increase in the tax bills of most property owners is used to offset the tax decreases of the other third. Two thirds pay more than their fair share of the tax burden under current revaluation practice and one third of owners don't pay enough.

With a revaluation every three years many owners are simply unable to keep up with their tax increases and are forced to sell their homes, not because the tax levy is increasing too much, but because new buyers are paying ever higher prices for their property requiring them to be overtaxed.

There is a real and fundamental difference between a person who is able and willing to pay $500,000 for a home and the associated tax, and another person living in a similar home who has been revalued into a $500,000 home. The right tax system must be able to address both individuals fairly. Currently it does not. We tax existing owners as if they too chose to buy their home at the new valuation. It is basically unfair to existing property owners.

There is an alternative way to revalue, (see http://righttax.org)which allows for the proper tax rate to be applied to new owners willing to pay those higher prices and at the same time, is fair to all existing owners who will pay their fair share of the tax levy in direct response to the needs of their town, the tax levy.

Only when new owners and existing owners alike pay their fair share of the tax burden have we fulfilled the request of our own constitution and the basis of our nation, fair taxes for all.

Language - Both Funny and Deadly

Language is arguably one of the most important of human abilities. The sharing of thoughts and ideas has enabled us to multiply our individual efforts and to achieve more than any species on earth.

Yet our misuse of language is often hard to understand and sometimes downright humorous. Words are misused and often say the opposite of what we actually mean. Rhode Islanders are especially picturesque in this regard.

"I could care less" is a very common Rhode Island expression used and understood by all. The person wants to show how little he or she cares about a subject, so little in fact that they could not care less, yet they say the exact opposite. Funny.

And now something not so funny.

"Abstinence only" sex education. How exactly do you teach someone how not to do something? Education is learning something not known before and yet children have been not having sex their entire lives up to that point. What might such a class sound like? "Don't have sex until you're married. Class dismissed".

On the other hand, teaching why one shouldn't have sex is more philosophy and opinion and should be left to parents and clergy, not to the public education system.

For example, I think we can all agree that teaching about the various world religions and cultures is legitimate public education. But teaching why one religion's view is preferable crosses the line and is clearly a violation of the US Constitution.

Maybe it's just me.

Don't hold your breath.

In the Providence Journal today (Sat. Dec. 30, 2006) there was a letter to the editor asking for legislators who can balance a budget without raising taxes ("Assembly spurned governor's cuts").

The day before, (Dec. 29, 2006, "Treasury appointee once filed for bankruptcy"), Katherine Gregg reported on an appointment by the treasurer-elect Fran Caprio, of Donald O. Reilly Jr.

This isn't about whether Mr. Reilly is qualified for the position. He might be a very nice person with excellent qualifications.

It is about a much more serious problem; the attitude and respect of our elected officials toward our money. It's about finding positions in government for friends (and family) instead of finding qualified people to fill necessary positions. In the piece there is a telling remark:

"In this situation," Caprio said, "Don will be someone that will be dealing with day-to-day issues in the office where his background in government and his professional background will be of use to the office and I look forward to working with him."

Asked specifically what Reilly would be doing, Caprio said that has not yet been determined, but "he is going to be working in the financial side of the office"

It's a small thing really, but for me it speaks volumes. A decision has been made, by the State Treasurer no less, to hire someone to do something "that has not yet been determined" but who will be paid with our money, of course.

Responsible budgets? Don't hold your breath.

Maybe it's just me.

NK, RI Town Council Meeting Dec. 11, 2006

Impressions from a citizen:

The new council got off to a good start, I think. The routine of running a meeting was understandably a tad shaky but will get smoother as time goes on. The mood was cooperative and respectful, a very good sign.

The first item on the agenda was an introduction of all the department heads to the council for the benefit of the new members. Maybe there'll be a test next week to see if they remember all their names?

There weren't any fireworks until a request to alter wetlands was before the council. It seems that because a lawyer didn't file a paper in a timely manner that DEM might consider a developer's request to encroach on wetlands to gain greater access to a house lot.

Not one person that spoke before the council was in favor of granting the exemption. The applicant wasn't there.

The council options are: a) lodge a protest or b) veto the request.

The problem is that should a veto be overturned, the town could be on the hook for damages the applicant might demand. The council opted to register a protest and not exercise a veto. Not an easy call for the town but the consensus was that strong town objections were usually upheld by DEM.

There was a discussion about the new tax levy limits, heading down in little increments from 5.5% to 4%. This year it will be 5.25%. The council talked about its own limits which could be even lower than the state's. A limit is just that, a limit; it's not a goal and I didn't see the point of saying that the council might want to spend less than the 5.25% increase. I take it for granted that the council will always try to spend as little as it can for necessary services, not up to a limit. Isn't that the idea of zero based budgeting?

Then came the item about the Elderly Tax Exemption. It makes sense that any exemption takes into account inflationary pressures on values and adjusts the limits of the exemption accordingly. My objection is with the whole idea of elderly exemptions at all.

Exemptions are given presumably on the basis of need. Income is measured as a percentage of the poverty level and the exemption is granted accordingly. Seems to me that a young family who finds that they can no longer afford their taxes on inflated property values are just as worthy of help as older people who find themselves in that position.

Exemptions such as this are a testimony to the need for true RE-FORM of the way we tax property to pay for local government services.

All in all a good meeting and I am very optimistic about the new council.

But maybe it's just me.

Property Taxes. Deal or No Deal?

On the popular TV game show, Deal or No Deal, host Howie Mandel asks the contestant a very important question, "Deal or No Deal?"

The contestant must choose between taking an unknown amount of money in his or her suitcase, or a known amount of money offered by the 'banker'.

What does this have to do with property taxes?

Taxes pay for government. Whether federal, state or local government, we pay for them all with our taxes.

For local government we have been taxing property for centuries. Long before the Industrial Revolution, long before there was a United States, we taxed property. The value in those earlier times was determined by the revenue produced by the property - more revenue, more value, more taxes. In fact one could say that the property tax in those early days was really an income tax.

Things are very different today. The market place determines the value of property. People who own property of equal value must pay equal taxes. No matter how wealthy they are, no matter when they purchased the property, the taxes will be equal if properties are of equal value. (To insure that new owners don't pay unfairly low taxes based on previous values we revalue property every three years.)

Most of us accept that this is a fair way to distribute taxes among tax payers as long as assessments are accurate and up to date. If it's fair, it begs the question:

Would you choose to pay your state or federal taxes based on the value of your house? "Deal or No Deal?"

"Hold on" you say, "no way. Pay state taxes on my revalued property? It wouldn't be fair!".

If it's not fair to pay state taxes that way, what makes it fair to pay for local government that way?

It isn't fair, at least not the way we do it today. Revaluations are indeed necessary to insure that new owners pay their fair share but those revaluations make it harder to hold on to a home, even forcing some existing owners to sell.

Maybe we should do away with property taxes altogether and have a local income tax.

Income taxes would be much more fair than property taxes. But they have serious drawback; they're very unreliable.

Today, when a town sets a tax rate, it is guranteed to produce the revenue required by the tax levy. This is a good thing, and very important for prudent management of our towns and cities.

On the other hand, if towns depended on income tax and sales tax revenues, and the economy stumbles, towns would face the same problems that the state currently faces, deficits and expensive borrowing. Clearly not a good thing.

The challenge is to retain the benefit of taxing property and, at the same time, discard the unfair treatment of our existing long time owners who are forced to pay taxes on homes they could never afford to buy at present day prices, while still assuring that new owners pay their fair share.

It can be done. We have just such a proposal on our web site at R.I.G.H.T.

I welcome your comments.

NK Town Council Meeting

November 20, 2006

First post-election Town Council meeting was about the shortest meeting in recent memory. It took almost as long to recite the Pledge of allegiance as it took to dispatch the agenda items. Way to go!

The interim manager, Cindy Olibri, mentioned in her report that the food bank is really low and in dire need of canned goods and non-perishable items. Sure hope that the shelves are filled soon. Donations are more than welcome.

The new Council will be sworn in next meeting at 7:00 to allow some extra time.

The recommendations for the new audit committee will be presented to the TC the following week, December 11.

During the public comments section a resident spoke of his concern for Quonset's plans for the new Gateway Project. He was very unhappy with the prospect of huge mega-stores as the main features of the project. It sure would change the character of North Kingstown and something on a smaller scale such as the Garden City mall would be more in keeping with the quality of life her in NK. I see much merit in his position. President Miccolis assured him that several councilors shared his view and they would try to maintain the more rural nature of the town.

See you next week.

Cure The Cancer of Terrorism

It seems clear to most people by now that our administration's policy to defeat terrorism has not had the desired outcome. As I write this, terrorism, sympathies for fanatic fundamentalism, deaths in the mideast are all on the rise. We haven't had another attack in the US yet but no one believes we are immune to one, that we are really safer today.

Administration policy is based essentially on an attitude that the only thing terrorists understand is brute force and they must learn that America won't stop until they change or they are all dead. Unfortunately, our efforts likely have created more terrorists. It sounds to me a lot like a failed treatment for cancer.

As we all know, cancer is a tumor that can grow uncontrollably, can invade surrounding tissue, and can spread to healthy parts of the body. Left untreated it will ultimately kill. We acknowledge that the best solution is prevention, but once discovered, what is the best way to treat it?

There are many kinds of cancer and good doctors understand that the best treatment must be tailored to the specific tumor. Terrorism is like a tumor with poorly defined borders that has begun to spread and invade. Our leaders appear to believe they can cure any cancer by hunting down and cutting out all the cancer cells, like a surgeon run amok. Doctors know that this naive and simplistic approach would most likely spread the cancer even faster, not cure the patient.

For a patient to have a chance for survival, this cancer needs to be deprived of its blood supply, the nutrients on which it depends to grow and spread its death. The patient might undergo the partial removal of the most diseased tissue but if the blood supply to the tumor can be cut off, if the patient stops activities that encourage more cancer, such as smoking, toxic food etc. and works to rebuild the body's immune system, the chances for survival are vastly improved.

Terrorism's revenue source, its 'blood supply', arguably is oil. If we are serious about removing terrorism's malignant threat we must do the smart thing and cut off this revenue source. As we did in WWII, we will need to make sacrifices, we will have to endure limited supplies of oil and increased energy costs, we will have to conserve energy, and embark on a crash program to develop alternative fuels. With the right leadership, we can do it.

Our current leadership's suggested treatment? Ignore the 'cancer', don't let them think they've won, blow smoke in their face, go to the mall, shop.

What we need are leaders who learn from mistakes, leaders who can inspire, leaders who can think, leaders who can lead.

But maybe that's just me.

Justice For All

Justice For All

The Pledge of Allegiance ends with those wonderful words and we know exactly what they mean. “All” means each and every one of us; not most of us, not most of the time, not the average. It means everyone.

Our Rhode Island Constitution proclaims that the “burdens of the state ought to be fairly distributed among its citizens.” Not most citizens, not the average citizen.

Are local taxes distributed fairly among all citizens, all the time?

Providence, 2004 - 57% of property owners got tax increases while 43% got decreases.
North Kingstown, 2001 - 61% paid more and 39% paid less.
West Warwick, 2004 - 73% got higher tax bills while 27% had lower tax bills.

While community expenses rise, large numbers of citizens pay lower taxes. Why?

In a word, Revaluations. In the years between revaluations, property owners pay taxes in direct proportion to the changes in the tax levies resulting from changing budgets. If a tax levy increases by a certain percent most tax payers’ bills increase by a similar percent.

This is a sensible process. But property values tend to increase over time. When new owners buy properties at higher and higher prices they might pay taxes inherited from the previous owner. This is highly unfair to existing owners. New owners buying the more expensive properties would not be paying taxes commensurate with their ability to pay as measured by the value of the homes they are buying.

The ‘solution’ has been to revalue. This results in more realistic and fair taxes for new owners, but unfortunately creates very unfair taxes for the majority of existing owners, as the distribution figures above suggest.

The truth is that after revaluation, most of your tax bill increase is used to pay for a decrease for someone else.

In our present (and ancient) system of tax distribution, a tax levy increase of 3% or 4% might be good for “all” but it certainly isn’t good for “every” taxpayer.

Maybe some are more “equal” than others. I sure hope not.

But maybe it's just me.

We have a proposal at R.I.G.H.T. that is fair to all and we mean everyone.

Is There Global Warming? It's The Wrong Question.

There are four possible truths regarding global warming:

1. There currently is no global warming.
2. There currently is global warming.
3. People do affect global warming.
4. People don't affect global warming

and two possible actions:

A. We change our behavior
B. We don't change our behavior.

There are eight possible results.

Outcome 1-A. If there is no warming, behavioral changes make no impact and produce only this:
Lower consumption of fossil fuels, significant changes in daily life, new technology, development of mass transit, significant economic impact on energy producers and automobile makers, new emphasis on renewable energy resources, cleaner environment, lowered dependence on foreign oil etc.

Outcome 1-B. Nothing changes. Unless of course, we run out of fossil fuel and are unprepared for it.

Outcome 2-A. The same as 1-A but there would be a beneficial effect on global warming, though the results will take years to occur.

Outcome 2-B. The world continues to support economies dependent on oil revenue, we continue to promote environmental pollution and hasten the global damage resulting from greenhouse gases in the quest for cheap oil.

Outcome 3-A = 2-A
Outcome 3-B = 2-B
Outcome 4-A = 1-A
Outcome 4-B = 1-B

We should be talking about consequences of being wrong in our assumptions and how quickly and effectively we can remedy any damage caused by a wrong decision.

We will either have to rebuild an economy disrupted by a fear that never materialized or we will have to restore the climate and environmental damage (perhaps impossible by the time it's acknowledged) caused by the continued use of and exploration for fossil fuels.

It seems to me that being wrong about the environmental damage is a far greater disaster than if we are wrong about the economic consequences.

But maybe it's just me