Why I Wouldn’t Mind Paying Triple the Taxes
Lest you think I’ve become a liberal, let me explain why I wouldn’t mind paying triple the taxes. Here in Philadelphia, the way our properties get taxed may be about to change. In the old way, your tax was computed by multiplying the tax (or “millage”) rate by a fraction of your assessed value. So hypothetically, if your house was last assessed at $75,000 and the fraction they were using was 60% and the millage rate was 4%, your property tax would be 4% x 60% x $75,000, or $1800.
The Board of Revision of Taxes wants to do three things: eliminate fractional assessments, reassess property values more accurately and often, and adjust the millage rate accordingly. On the first, basically what they’re saying is that instead of the 60% we used in the above example, the fraction would always be 100% (before, fractions were different for different properties based on geography and type, and now everything would be the same). On the second, what will happen is that properties in hot neighborhoods will now be taxed based on their higher values, and properties in declining neighborhoods would be taxed based on their lower values. And on the third, adjusting the millage rate means setting it so that any changes in the first and second will not cause the amount of tax collected by the city to go up or down, but stay the same (not your bill, but the total take for the entire city).
So to go back to our original example, let’s say the house that was last assessed at $75,000 gets reassessed at $125,000, and that the millage rate was adjusted downward to 3%. Now your property tax bill will be 3% x 100% x $125,000, or $3750, or double what you paid the year before.
You can see why politicians in hot neighborhoods, and the people they represent, would be upset about these changes. Some houses that were bought for cheap and assessed for even less that are worth much more in the open market will now get socked with much higher property tax bills. Those that would be affected thusly are asking for a rejection of the changes, or at the very least a delay or a scaling-up process.
I am not one of the protesters. Although I am in general a fan of lower taxes, I also believe in the fairness of the progressivity of taxes, that is to say that the more you have the more you ought to be taxed. If you look at what is known as the effective tax rate, which can be calculated as the tax bill divided by the market value of your property, the lowest rates are in the richest neighborhoods and the highest in the poorest neighborhoods. In other words, the poor are paying a higher amount of their wealth in property taxes than the rich, the exact opposite of a progressive tax.
In fact, the Philadelphia Tax Reform Commission came to the exact same conclusions in lobbying for these changes that are on the brink of being enacted. The changes would essentially shift this part of the tax burden (of course the city collects other taxes, but property tax is by far the largest slice of the pie) from the poorer to the richer. I was sold then, and I am still sold now, even as a homeowner in a hot neighborhood where property values have shot up 100-300% in the past five years, and where property taxes stand to double or triple or more if these new policies are put into effect.
Don’t get me wrong: these changes would have some negative consequences. Some long-time residents in appreciating neighborhoods might be forced out by a huge jump in their property tax bill. I empathize with the politicians from these neighborhoods, none of whom want to be seen as supporting something that will reach deeper into the constituent’s pockets. And this redistribution of resources from rich to poor could hinder the city’s ability to retain the upper-class and middle-class families it has been bleeding for fifty-plus years.
Nevertheless, I think the changes are the right ones to make. I want to live in a city that taxes its citizens, both rich and poor, fairly. Improved accuracy in property tax assessment can streamline administration and minimize discrepancies. Capturing taxes through property ownership is superior in many ways to doing so through Philadelphia’s unpopular wage tax. So I support the changes. Even if they mean I’ll be paying triple the taxes.
Postscript: For more information, go to philadelphiaforward.com or brtweb.phila.gov. At Philadelphia Forward, there is a calculator that determines your new rate based on different permutations of changes: no change to tax rate, with and without buffering the changes so that there’s not a big jump from last year to this year, and (another Tax Reform Commission recommendation) if they decide to tax land more and buildings less (to discourage land speculation). Based on these calculations, my tax bill would be anywhere from 84% to 174% higher than last year.
The Board of Revision of Taxes wants to do three things: eliminate fractional assessments, reassess property values more accurately and often, and adjust the millage rate accordingly. On the first, basically what they’re saying is that instead of the 60% we used in the above example, the fraction would always be 100% (before, fractions were different for different properties based on geography and type, and now everything would be the same). On the second, what will happen is that properties in hot neighborhoods will now be taxed based on their higher values, and properties in declining neighborhoods would be taxed based on their lower values. And on the third, adjusting the millage rate means setting it so that any changes in the first and second will not cause the amount of tax collected by the city to go up or down, but stay the same (not your bill, but the total take for the entire city).
So to go back to our original example, let’s say the house that was last assessed at $75,000 gets reassessed at $125,000, and that the millage rate was adjusted downward to 3%. Now your property tax bill will be 3% x 100% x $125,000, or $3750, or double what you paid the year before.
You can see why politicians in hot neighborhoods, and the people they represent, would be upset about these changes. Some houses that were bought for cheap and assessed for even less that are worth much more in the open market will now get socked with much higher property tax bills. Those that would be affected thusly are asking for a rejection of the changes, or at the very least a delay or a scaling-up process.
I am not one of the protesters. Although I am in general a fan of lower taxes, I also believe in the fairness of the progressivity of taxes, that is to say that the more you have the more you ought to be taxed. If you look at what is known as the effective tax rate, which can be calculated as the tax bill divided by the market value of your property, the lowest rates are in the richest neighborhoods and the highest in the poorest neighborhoods. In other words, the poor are paying a higher amount of their wealth in property taxes than the rich, the exact opposite of a progressive tax.
In fact, the Philadelphia Tax Reform Commission came to the exact same conclusions in lobbying for these changes that are on the brink of being enacted. The changes would essentially shift this part of the tax burden (of course the city collects other taxes, but property tax is by far the largest slice of the pie) from the poorer to the richer. I was sold then, and I am still sold now, even as a homeowner in a hot neighborhood where property values have shot up 100-300% in the past five years, and where property taxes stand to double or triple or more if these new policies are put into effect.
Don’t get me wrong: these changes would have some negative consequences. Some long-time residents in appreciating neighborhoods might be forced out by a huge jump in their property tax bill. I empathize with the politicians from these neighborhoods, none of whom want to be seen as supporting something that will reach deeper into the constituent’s pockets. And this redistribution of resources from rich to poor could hinder the city’s ability to retain the upper-class and middle-class families it has been bleeding for fifty-plus years.
Nevertheless, I think the changes are the right ones to make. I want to live in a city that taxes its citizens, both rich and poor, fairly. Improved accuracy in property tax assessment can streamline administration and minimize discrepancies. Capturing taxes through property ownership is superior in many ways to doing so through Philadelphia’s unpopular wage tax. So I support the changes. Even if they mean I’ll be paying triple the taxes.
Postscript: For more information, go to philadelphiaforward.com or brtweb.phila.gov. At Philadelphia Forward, there is a calculator that determines your new rate based on different permutations of changes: no change to tax rate, with and without buffering the changes so that there’s not a big jump from last year to this year, and (another Tax Reform Commission recommendation) if they decide to tax land more and buildings less (to discourage land speculation). Based on these calculations, my tax bill would be anywhere from 84% to 174% higher than last year.
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