Surprise: ThepPropertyTax Could Be Good ForYou

...The state legislature wasted no time passing a law exempting bank intangibles...

...Apparently there was never any need for secret meetings, for the result was the same: the haves-in this case, the largest, most influential, and most profitable commercial properties in the city-have received a bonanza in tax breaks...

...It’s fueled not by money, but by that combination of laziness and incompetence and bureaucratic fear of the powerful that’s such a basic motivating force in even the most honest city governments...

...Because property taxes are used so heavily to fund local school districts, it was obvious that “property poor” taxing districts either had to have very high tax rates or schools that Tax the wealthy at a hi her rate = relative roperty accor 3 ing to the va f ue...

...The first three proposals offer the means to increase property tax receipts...

...And how do the taxpayers of California feel about this off-the-wall approach to tax relief...

...In Washington, D.C., for example, during one of the biggest commercial property booms in the country, the local tax assessors have given some of the owners of the city’s most valuable downtown properties huge tax breaks, in blatant violation of a court order...

...Many a church or university can well afford the burden of the property tax, and they certainly reap the benefits of the services the tax provides...

...Statistics also show that the richer a person is, the better the chance he owns substantial amounts of property...

...In Arkansas, a public interest group tried to claim that the state’s banks were not exempt from tax on their intangible property but were simply ignoring it...

...If all of this is so, then why does the property tax have such a bad name...

...And if you find it hard to believe that the services those taxes now pay for will really be eliminated, then you’ll see that the services will in the future be paid for through some other tax, one that falls more heavily on the middle class and poor...

...Currently, rates in the state start at three per cent and go up from there, and the Jarvis method of property tax reform would probably cut state revenues by as much as 60 per cent...

...If the Jarvis initiative carries the day, the two-thirds cut in property taxes means a windfall savings for people like the Hollywood movie stars who own million-dollar properties in Beverly Hills...

...The next step is to reform the tax in theory as well as in practice, so that it can realize its potential as the most ideal, from a liberal’s standpoint, of all taxes-a tax that people pay according to their ability to pay it...

...Economists look at this “reform plan,” shake their heads, and chuckle condescendingly...

...All this was happening in a city where the local tax officials pride themselves on the modernity and efficiency of their operation, which makes the contrast between promise and practice even more startling...

...Poor assessment practices, bad administration, petty corruption-these are the legacy of the property tax...

...They just plain don’t like them...

...Anybody who grew up in a town ruled by a powerful political machine knows that property tax assessments can be one of the sturdiest foundations of municipal corruption, ranking up there with road-building contracts and zoning variances...

...A lot of it was just newspaper exposure...

...weren’t as good as the rich enclaves across the tracks...

...Some new ideas are now being proposed to help out the elderly widows...

...The so-called Jarvis initiative, on the ballot in the state’s primary election next month, is simple Joseph Nocera is an editor of The Washington Monthly...

...The Tax intangible property like stocks and bondsthe single bi gest tax loopho B es...

...To own property in this country, then, is to be better off than most...

...Part of what is instructive about the Washington experience is the way it is being corrected...

...All we saw in the Post was a rather tame editorial admitting that maybe commercial and residential properties ought to be made a little more equal and one catch-up story after The Washington Star first broke the story last year...

...Donald G. Hagman, a UCLA law professor puts it as bluntly as anyone when he writes: “Just because a little old widow drove a Cadillac when she was a married matron shouldn’t give her the right to do so when her income falls off and she can no longer afford it...

...If the vote were held today, it is uniformly agreed, the Jarvis initiative would pass in a landslide...

...You’ll have a tax that will keep the economists, the liberal politiciansand the elderly widows-all happy...

...That makes sense: besides the obvious benefit that no one neighborhood gets a free ride, it also keeps tax bills from jumping monumentally...

...No longer do they take it as fact, for example, that businesses always pass along every cent of their property taxes...

...Precisely because it isn’t corrupt in the traditional sense, Washington is a valuable lesson in how and why property taxes can get so screwed up in practice...

...the homeowner, allowing the person to live in the home in the meantime...

...With inflation, skyrocketing property and land values, urban redevelopment, and the need for local governments to raise taxes to fund a variety of services, property owners have seen their taxes go through the roof...

...She has a house and some land, and if she can’t pay her property taxes, that means her property and therefore her net worth is rising dramatically...

...Virtually every interview I conducted with the critics of the local assessment office began the same way: “These guys [assessors] are not corrupt...

...That’s twice the income generated by property taxes now...

...Similarly obscured is the question of whether the property tax is a good way of financing local services, in terms of how it distributes that burden, or a bad one...

...The federal bill to set uniform assessment standards ought to be revived...

...Antiquated administrative practices and insufficient commitment of resources have prevented even responsible officials from protecting the public interest...

...you can see local politicking or incompetence or even corruption in a way you can never see Russell Long slipping in an income tax loophole for an oil buddy...

...Of late, Jarvis has gained more notoriety than he ever dreamed possible as a state senator...

...Naturally the assessment office denied that the publicity had anything to do with the rise...

...In addition, it avoids one of the real hidden subsidies of the property tax: the case where market values are going up, but properties are not being reassessed...

...The income tax, by comparison, has quiet loopholes, passed quietly by Congress, often unnoticed by the press, and administered even more quietly by the Internal Revenue Service, a regulatory body that prizes secrecy above all else...

...to the point of being simplistic: Jarvis would cut all property taxes in the state to one per cent of the market value of the home or business...

...For too long liberals have rallied around the income tax as the fairest of all taxes...

...All over the country, most people don’t have very complex feelings about property taxes...

...No longer is the property tax the sacrosanct method of funding schools...

...In others, rich districts are being forced to contribute some of their property tax income to a state pool, which is then redistributed to poorer districts...

...That idea has not gone over too well with the politicians thus far...

...The charge by a city auditor that the 20 top commercial properties were generally being grossly underassessed was a big hit in The washington Star last year...

...But there isn’t a politician in his right mind who is going to say a thing like that...

...When it comes to understanding the implications of the property tax, economists and some public interest tax reformers are light years ahead of the politicians...

...A good way to get unelected, fast, is to call on all the elderly widows to sell their homes and live somewhere cheaper...

...This year, the Star had headlines just as big showing that commercial property assessments had gone way up and will produce millions of dollars of additional revenues for the city...

...Homeowners in this situation are really getting tax breaks because they are paying taxes on out-of-date prices...

...The City of Los Angeles, for example, put together a “Jarvis budget” showing that one third of all city workers would have to be laid off, including 2,200 police officers and 1,000 firemen...

...He has also raised more hell...

...Tax the wealthy at a higher rate...

...Income taxes, sales taxes, even the grotesquely regressive lotteries are easier to take because they grab only a little of your money at a time...

...The big boys do, and they usually win because the tax assessor has slipped up on what the assessors refer to as “technicalities...

...In 1968, the Securities and Exchange Commission figured intangible property came to $3.9 trillion, which, if taxed at two per cent, could bring in $80 billion in tax revenues...

...Jarvis has also figured out a way to make life difficult for anyone trying to pick up the slack by raising other taxes...

...After a few hearings, the bill died a quiet death...

...Obviously a lot of California homeowners would lose services that are valuable to them under the Jarvis plan, but that truth has by and large been obscured by the shining dream of paying less property taxes...

...Rich or not-so-rich, almost all homeowners see it as in their interest that the property tax be cut...

...Our homeowner in Boston has no way of knowing what kind of income tax breaks his neighbors are getting...

...With the circuit breaker, which was pioneered in Wisconsin, if a homeowner’s income falls below a certain level, he gets a tax break no matter how high the property is valued...

...The assessing office’s excuse that rates did not go up because the downtown area was stagnating is demonstrably false: at the same time that this was going on, Washington was in the middle of the biggest real estate boom-both commercial and residential-in the country...

...Property tax reform has alwaysjust meant relief,” says one tax analyst...

...Yet while urban redevelopment was wreaking property tax havoc in some formerly poor neighborhoods-residential assessments have risen about 74 per cent in the last two years-the building boom downtown, where in 1975 three million square feet of new downtown ’ office space was being marketed, was being ignored...

...In California, They’re Mad As Hell And They’re Not Going To Take It Any More-and if that means a few libraries have to close and some city workers have to learn the way to the unemployment office, well, so be it...

...The politicians usually point to a few elderly widows being forced out of their homes because of rising property taxes in announcing their “relief” measures, but it’s not the elderly widows who will see most of the relief...

...The California experience is unique only in the extremity of its proposed solution...

...A widow on a fixed income, they say, simply isn’t that poor...

...At their worst, they’re openly bought and sold, raised and lowered individually as a way of dispensing rewards and punishments...

...The Jarvis thing is bullshit,” was the succinct comment of one Washington, D.C.-based tax specialist...

...Now let’s state the not-so-obvious: the property tax is probably the most progressive tax in America...

...The notion that landlords recover all their property taxes by passing them along to renters is also now under attack...

...Indeed, the Post’s accountants appeared to go out of their way to make things more difficult for the tax assessors by refusing to give the city appropriate information about its income, on which the assessments are based in large part...

...The trend needs to be reversed and there’s no better place to start than intangible property like stocks and bonds...

...Property tax analysts, as long as they are not based in California, have a hard time taking Jarvis seriously...

...In 1973, a Senate subcommittee headed by Senator Edmund Muskie, reported: “For too long, the average taxpayer in most states has been at the mercy of inexpert local officials, arbitrary bureaucracies and privileged interests...

...On the federal level, there has been only one attempt-in 1973-to set up some kind of uniform standards for property tax assessors...

...Base property tax exemptions on need...

...The situation in Washington isn’t unique, of course...

...In this plan, a person who has paid for his home could essentially sell the house back to a buyer on a longterm basis...

...You never really feel the pain...

...Many economists now believe that in many cases less than half is passed on...

...The property tax, in most places, is a lump-sum payment...

...When you consider these factors, the economic theory goes out the window, and rightfully so...

...Yet they also admit that they prefer to deal with single family homeowners because, as one official put it, “those people usually don’t take us to court...

...The sort of bureaucratic bungling that leads to illegal tax breaks for the wealthy goes on all over the country...

...It was the supervisors who, back in the office, erased the new assessments for the large hotels and large office buildings and, apparently, The Washington Post...

...Administer the property tax correctly and equitably, strip away some of the more blatantly unfair exemptions, force the wealthy to pay property taxes at a higher rate, and you’ll have a terribly worthwhile tax...

...In some cases, state income taxes are being used to supplement property taxes...

...One of the most interesting is a sort of “reverse mortgage” approach aimed at older people...

...If you read The Washington Post, you may not have heard much about this, but then that may be because the Post, being the sixth most valuable property in the city, was saving about $1 million a year in property taxes...

...In fact, the richer a person is, the better the chance that he has a sharp lawyer who can lead him to the loopholes of his choice...

...There is no good reason why expensive pieces of residential property should pay the same rate as small single-family homes...

...Gaffney, for on$, calls that “a notorious distortion of economic trends...

...Do something for the elderly widows...

...In this time of inner-city housing booms brought on by urban redevelopment-primarily a phenomenon of the post-war periodrising property tax should not be a way of letting speculators and developers take over neighborhoods...

...There is no doubt that we should clean up assessments nationwide...

...One of the more creative ideas along these lines would be to devise a plan that would exempt churches and schools only in cases where there was a genuine need...

...They are the single biggest tax loopholes in the country...

...Assessors here are now required to reassess all properties city-wide every year...

...But in an effort to cut Jarvis off at the pass, the California legislature passed overwhelmingly its own version of property tax reliefrelief that calls for a 30-percent cut on homeowners’ property taxes...

...The persistent attempts by local, state, and federal politicians to “reform” the property tax have included precious little effort to do something to straighten out the shoddy, uneven, often unfair assessments...

...Because economists don’t have to run for reelection, they can afford to be quite heartless about property and property taxes...

...But there’s another reason why property taxes are unpopularfrustratingly often, they don’t work the way they’re supposed to...

...They don’t have to consider the emotional importance of a person’s home, the feelings of comfort and solace it can give...

...Indeed, there are now so many loopholes geared to the well-to-do that many economists no longer accept it as an article of faith that the income tax is progressive...

...Clearly this would be a tax on the wealthy: the richest one per cent of the population owns 70 per cent of America’s corporate stock...

...Because the property tax is used primarily to fund local governments, they say they will be crippled if it passes...

...The exemptions now are often a subsidy for the already wealthy...

...If that is done, then fair and just relief can be given to those who really need it...

...But for those who talk about making our tax system truly progressive, relief measure after relief measure is counterproductive...

...or, “There is no evidence of any political influence to underassess land values...

...Yet politicians-often the liberal, friend-of-the-poor types-are forever proposing property tax relief bills that have the effect of making the rich richer...

...Period...

...It’s the rich...

...For the movie stars, that’s still quite a bonanza, far more meaningful than the few hundred dollars in savings that the middle-class homeowner will realize...

...It turns out in this case that the junior assessor-the person who goes out to the buildings and sets a market value-was doing his job...

...During this century, there has been a steady erosion of property tax revenues as it has gone from being a tax on all kinds of property to one predominately on real estate...

...Gaffney isn’t much better...

...Another idea gaining increasing popularity in some political circles is the so-called “circuit breaker,” a relief exemption based on income...

...Some other changes in the way Washington used to do business that ought to be emulated elsewhere have come from the courts...

...In the five years since that was written virtually nothing has changed...

...They’ve already won, and the only question now is by how much...

...And the bank, of course, would be the one hit with the increasing property tax bills...

...Another idea currently under attack is the liberal notion that property taxes guarantee substandard schooling in poor areas...

...People like Ralph Nader and his Tax Reform Research Group have joined in that chorus and have for some time been challenging some of the most cherished liberal beliefs...

...He wrote: “Since the ownership of capital, or net worth, is progressively distributed with respect to income, the property tax on balance is a progressive, not a regressive tax...

...But the problem here is not with the property tax, it’s with the application...

...While residential assessments in D.C...

...There has been a real turnabout in economic thinking on the property tax in the last five years, typified by Henry Aaron’s 1975 Brookings Institution study, Who Pays the Property Tax...

...There was a feeling around here that nobody wanted to get near property tax,” recalls an aide...

...Economists generally take a hard line against elderly widows...

...Like the tax itself, assessments are visible...

...As Mason Gaffney, a proproperty tax economist, pointed out in this magazine in 1973, “If one wants to escape the property tax, there is no simpler route than being too poor to buy real estate...

...Anyway, better late than never...

...in the past few years one state court after another has knocked down the traditional methods of school financing...

...Politicians can look with compassion on the elderly widow and on the less well-off who live in revitalized neighborhoods, without feeling they are sacrificing police or fire protection...

...There is no good reason why elderly widows and poorer people should be forced to move because they can’t pay property taxes...

...In cleaner jurisdictions the corruption is more genteel, but it still exists...

...no other tax where you can see quite so clearly that you are paying so that others-the university up the road, for examplemight be exempt...

...We could easily set up a system of different “tax brackets” according to the relative value of property...

...have shot out of sight, most of the big properties have stayed close to the same for the last five years, and in some cases as far back as 1969...

...The numbers usually cited show that while the top tenth of the adult population receives about 30 per cent of the income, the top tenth of the property owners hold between 50 and 60 per cent of the real estate...

...or, “There were never any secret meetings...

...What Jarvis has done to send the California political establishment into an absolute tizzy is devise a property tax relief plan so dramatic, so drastic, that it would cut $7 billion from the tax bills of California homeowners and businesses...

...The assessments process is still the biggest reason people complain about property taxes...

...We say we do it with the income tax, so why not with property...

...That will make property tax more fair and less capricious, at least, and thus lessen people’s instinctive hatred of it...

...When assessments are fair, Americans will still not enjoy paying property taxes, of course, but they’ll be less susceptible to the blind distrust of them that makes Jarvis-type let’s-justgetrid-of-it schemes so attractive right now...

...For too long, politicians have been able to make political hay by proposing “relief” plans, while saying nothing about the illegal relief for the wealthy or the politically well-connected brought on by unfair assessment practices...

...Particularly those on fixed incomes, but others as well, complain that their taxes have risen to the point where they are being forced out of their hard-earned homes...

...And this was while the city was under court order to assess all properties twice over a four-year period...

...With all its universities and churches, fully half the land in Boston is tax-exempt...

...Nothing illustrates that better than the situation in California right now: because of legislative maneuvering it no longer matters to the rich whether Jarvis wins or loses...

...That’s political lunacy...

...Part of the reason is that it is by far the most visible tax we pay...

...Here are some of the more basic reform measures liberals should be pushing for: .Tax intangible property...

...There is no other tax where you can feel the impact of inflation quite so brutally...

...All the while, these same officials were, on the one hand, steadily putting the squeeze on residential property owners, and on the other, talking about how these homeowners needed tax relief...

...In every case where the courts have ruled the old property tax method unconstitutional, the state government has managed to find money for local schools elsewhere...

...In theory, it ought to be the cornerstone of a liberal tax policy for this simple reason: it is by far the best way we have of taxing wealth...

...What we have here, then, is a fullfledged taxpayers’ revolt...

...The payoff for the bank would come when the house becomes unoccupied and available for sale...

...assessment people here continually refer to their spiffy new computer system and their charts, which purportedly show that assessors come within two or three percentage points of estimating the market value of homes in every neighborhood in the city...

...When the Boston homeowner drives down the street, he can see exactly why he is paying nearly nine per cent of his income in property taxes-one of the highest rates in the country...

...The buyer, most likely a bank, would send a monthly check to Manv a church or univirsity can well afford the burden of the property tax...

...He suggests that elderly widows ought to sell their homes, put the money in a savings account and pay for an apartment with the interest...

...The jolt of an increase is felt head-on, and it hurts...

...He’s got a provision that requires a two-thirds vote of the state legislature to increase any tax, and another that calls for the approval of two-thirds of all “registered voters” (as opposed to only those who go to the polls) before local governments could raise taxes...

...Even there, there have been many exemptions, including agricultural lands, universities, and the tax bribes more and more states are resorting to in an effort to attract new business...

...A 74-year-old former California state legislator, Jarvis calls himself an “archconservative hell-raiser,” a description that, according to people who know him, is precisely accurate...

...Let’s state the obvious: Among the vast majority of homeowners, the feeling is that property taxes are ridiculously high...

...City planners and local officials in California fear it like the plague...