Two Cheers for the Property Tax

...Without property taxes, many seniors would only be taxed on their fixed incomes-which often grossly underestimate how well-to-do they actually are...

...But such taxes shift more of the burden onto the middle and lower classes, who must buy basic goods, even if they can’t afford property...

...A study conducted by University of Maryland economists Wallace Oates and Robert Schwab, comparing Pittsburgh to 14 other eastern cities during the decade before and the decade after Pittsburgh expanded its two-rate system, found that: “Pittsburgh had a 70.4 percent increase in the value of building permits, while the 14-city average decreased by 14.4 percent...

...Washington state has perhaps the best system, having tackled the issue of favoritism head-on and passed a constitutional amendment declaring that statewide property tax rates must be uniform...

...In each community, homeowners, businesses, and non-homestead residences (like apartment buildings) vie to lighten their portion of the tax load...

...Governor Pataki, along with a slew of legislators, has vowed to cut property taxes...

...In Minnesota, for instance, betiveen 1977 and 1990 homeowners were able to cut their share of property taxes from 45 to 36 percent, even as their share of real estate values rose from 51 to 56 percent...

...For starters, contrary to popular belief, the property tax serves as a vital complement to other types of taxes...

...This allows states to tap a deep vein of revenue and distribute it equitably...

...But as property taxes go down, local taxes, user fees, and college education prices continue to surge to make up the difference...

...Pittsburgh, for instance, has initiated a “split-rate” system in an attempt to foster urban renewal...

...Set it up so people can pay electronically...

...Now, we’re not tallung about the 70-year-old Brooklyn couple whose fixed income barely covers the taxes on the brownwone they bought 30 years ago...

...Property tax rates are just as varied...

...This, in turn, forced a massive transfer of state funds to support schools, which left the state with no choice but to cut spending on child welfare, prisons, and state police...

...For example, all real estate property is currently taxed at approximately 1.2 percent...

...The situation is no different in New York...

...In Texas, voters overwhelmingly approved Proposition 1, a ballot measure providing $1 billion in property tax “relief...

...They will no longer see the property tax as a mindless ogre coming to swallow up their hard-earned money...

...Cutbacks in property tax have got to be made up and they’re not going to be done by a more progressive tax,” he says...

...This plan is not truly tax relief!‘ But it is Oregon that gives us the most vivid example of what happens when property taxes are slashed...

...The northwestern state passed Measure 5 in 1990, putting a cap on all property tax increases...

...It’s not surprising then that the property tax has earned such a bad rep among voters-and even less surprising that politicians have latched onto the issue...

...Two Cheers for the Property Tax Everyone bates it, but tbe property tax has some good attributes that make it indispensable BY STEVE GINSBERG To MOST AMERICANS, THE PROPERTY tax is about as revered as communism and as popular as a pro-lifer at a NOW rally...

...In Florida, the large and religiously anti-property tax seniors population has pushed lawmakers into reducing the property tax rates for some, and completely exempting others...

...After all, what’s the point of having all that dough if you’re not going to spend it...

...Furthermore, as far as many homeowners are concerned, the manner by which both tax rates and individual property values are determined could not be more random if they were plucked out of a hat...

...Often, regardless of actual property values, whichever group happens to have the most lobbying clout gets a break, while the losing parties are left to shoulder more than their fair share of the burden...

...It’s not surprising then, that the powerful AARP seniors lobby is pressuring states for an overhaul of the property tax system...

...But before we pop open the champagne to toast these developments, we need to take a close look at the upside of the property tax...

...Property taxes do blindside some senior citizens, and there’s no reason why they should have to move out of their lifelong homes because the market value of the house has gone up...

...A major reason property tax is so unpopular is that it’s administered in huge chunks and people aren’t allowed much time before hefty late fees kick in...

...In Pittsburgh and other Pennsylvania cities where the “split-rate” is employed, 85 percent of homeowners pay less than they would with a flat rate, according to analysis by the American Journal of Economics and Sociology...

...Most importantly, the system achieves its goal of encouraging economic growth in urban centers...

...Even if they manage to downplay their annual income, chances ate, rich folks are going to buy property...

...If you have any doubts about the lund of fiscal havoc the elimination of the property tax can cause, you need only look at what’s happened in the states that have “reformed” it...

...The reasons are not hard to understand...

...Similarly, property taxes improve the accuracy with which the wealth of senior citizens-whose assets tend to dramatically outweigh their cash incomes-can be taxed...

...They can’t resist owning that summer home in Nantucket, that weekend home in the Hamptons, or that colonial mansion in Georgetown...

...But that’s no slun off their noses: The rich can always send their kids to private school, and most old people’s kids have already flown the nest...

...If seniors and the wealthy feel that the taxes support services they need, they will have reason to pause before directing their lobbying muscle against it...

...A moderate raise in the exemption level would prevent poorer seniors from losing their homes, while still raising revenue from the wealthy...

...Raise the level of exemptions for people over 65...

...Upgrade technology...

...You start getting taxes on trash collection and recreation facilities...

...With user fees things are becoming less progressive because you’re paying as much as the next guy”-regardless of whether he happens to be a millionaire...

...Of course, almost immediately after the bill passed, school districts across the state announced that they would have to raise other taxes to make ends meet...

...All of this financial finagling, of course, only strengthens taxpayers’ conviction that the system is inherently unjust and highly politicized...

...The property tax ensures that his tax bill reflects his good fortune...

...But lots of seniors have invested in real estate other than their primary residences...

...if you miss the deadline, you must pay late fees whether you received your notice or not...

...Furthermore, he can spend his fixed :mnual retirement income without a second thought--knowing that if he’s ever low on funds, he can simply cash in his property...

...In some cases this is because on-site assessments are only done infrequently-like every five to 10 years...

...For although the list of the system’s failures is long, people who advocate lowering or abolishing the tax outright are in many cases not considering the big picture...

...Already, states as politically diverse as Oregon and New York have moved to defang the property tax...

...Stagger payments...

...In addition, all property tax revenues are split between the state and localities...

...If you’re loolung to win votes, opposing the property tax is a no-brainer: It’s like declaring that you’re antidrugs...

...The law’s supporters in the legislature said they had to act “before there was a taxpayer revolt...

...Localities can’t get states to pick up the tab, so there’s a big shift to user charges...

...Property tax is really two separate taxes, one on land and one on building values...

...For instance, our income tax system may be geared to collect more from the affluent, but it also includes numerous loopholes that allow the rich to slip out of paying an amount of tax truly commensurate with their wealth...

...STEVEN GINSBERG is an editorial aide at The Washington Post...

...He can enjoy the benefits of his good fortune long before he actually sells thme investnifcnts...

...People should be treated fairly and folks shouldn’t get deals...

...Thus a shack and a renovated loft in the same area can be valued at the same amount...

...Thus the :tmount of property you own is as important an indica tor of how well-off you are as the income you’re officially pulling in each year...

...Worst of all, these alternative methods simply can’t raise the same amount of revenue as the property taxes did...

...The property tax picks up where the income tax leaves off...

...Who Will Pick Up the Slack...

...Small wonder that Florida kids consistently place near the bottom in national reading and math tests, alongside much poorer states such as Louisiana...

...Distributing the burden over four or more payments a year, with more advanced notice, would take some of the sting out of the bill...

...Consequently, notes Kurt Wenner, an economist with Florida Taxwatch, “the schools don’t have much of a chance...

...We have a good system of assessment that eliminates inequities, and the uniformity is vital...

...The real key is that the system is administered fairly,” says Kriss Sjoblon, an economist at the Washington Research Council...

...For instance, ownership of pricey real estate makes him eligible for large loans on which the interest is tax deductible...

...In many jurisdictions, including our nation’s capital, the government isn’t even required to do you the courtesy of mailing that bill...

...Under such a system, localities ultimately get to administer their portion of the pot, but the disparity between rich and poor districts is not so wide...

...The result is a maze of slimmed-down services and hidden “nontax” fees that end up unfairly shackling the middle class...

...A handful of governments around the country have already started the ball rolling, instituting models that correct some of the more egregious flaws...

...And, as Chris Herbert, an economist at the Harvard-MIT Joint Center for Housing Studies, points out, the property tax is far more progressive than the alternatives...

...And, yes, there is a considerable one...

...Aside from these more comprehensive systems, there are a number of basic steps localities could take to alter the perception of unfairness and ease the burden of property taxes: Use the property tax to pay for more than just schools...

...The city then lowered the tax on buildings, giving property owners an incentive to maintain, build, and improve their properties, while at the same time increasing the levy on land values, thus discouraging land speculation and stemming urban sprawl...

...It’s a small thing, but it will make a difference...

...Instead, they will see it as the soundest way to make sure that everyone, especially the wealthy, contributes his share to ensure a high level of public services...

...And as baby boomers slide into their golden years, we can expect this branch of the anti-property tax lobby to grow even stronger...

...Rooting out favoritism and slipshod assessment methods will help make the tax palatable to the majority of citizens...

...Every year property owners are hit with a large tax bill, demanding a nearly immediate lumpsum payment...

...Mend It, Don’t End It But if we want to get the property tax off the political hit list, we need to address the legitimate problems with the current system...

...No doubt the rich and the elderly recognize that abolishing or lowering property taxes would deal a crushing blow to thl: schools in their communitieswhich is where the bulk of the tax’s revenues go...

...Most cities allow offenders to pay parking tickets with credit cards, there’s no reason they can’t do the same with property tax...

...To compensate for the reduction in real estate taxes, Maine will be forced to extend its 6 percent sales tax to a wide range of everyday sources that directly hit middle-class wallets, including movie theaters, bowling alleys, beauticians, and barbers...

...Take the case of a retired speculator who bought property years ago and has watched gleefiilly as its value skyrocketed...

...This forces assessors to rely on unreliable estimation methods in the intervening years, such as setting the value of a property based on what neighboring real estate sold for that year, regardless of how the condition of those properties compares with that of the building being assessed...

...Taxpayers in Maine are looking to reduce their property tax bills by expanding the homestead exemption by $20,000, a measure that would rob the state of $200 million in finds...

...The New York proposals are so unbalanced they prompted Patricia Woodworth, director of the budget for the State of New York, to complain to Newsday last April, “the benefits are going to go to those who have the greater monetary and financial interest in property holdings, which is not the average person...

...Of course, cashstrapped communi ties are unwilling to stand by as their schools are devastated and may raise’other kinds of taxes-like sales taxes-to make up for lost revenue...

...So a young family of four buylng a home in San Francisco’s pricey real estate market is slapped with an exorbitant tax bill, while the filthy-rich investment banker down the street is still paying the same amount in taxes as when he first purchased his home in 1979...

...In short, they will see it for what it is...

...The analysis also found that those who do pay more tend to be wealthier homeowners...

...An exemption can and should be made to ensure taxes don’t force elderly people out of their homes...

...At first glance, the property tax system seems arbitrary, unreasonable, and just plain unfair...

...The bottom line: When property taxes are cut, other taxes must be raised to make up for lost revenues...

...In other communities, like those in California, property values are reassessed only when a building is sold...

...These findings are especially remarkable when it is recalled that the city’s basic industry-steel-was undergoing a severe ‘crisis throughout the latter decade...

...Pittsburgh simply separated these two values...

...Even jurisdictions with special needs can establish systems that are less arbitrary and that make sense to the average taxpayer...