3.24.2009

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I was so pleased recently to see some push back on one of my previous posts that I not only responded but have posted the exchange here. [Original post here.]It should go without saying, but I'll say it anyway, that what I write is simply my perspective, which is woefully limited and open to being shaped by the opinion of others. Therefore, please feel free to chime in on this and/or any other of my rantings

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Dear Urban Christian,
I too am an urban Christian and I could not agree LESS with your comments. I bought my home many years ago and struggled with the mortgage for years. I sacrificed to keep my home. Now I find myself with a limited income (no I am not a senior citizen) and not able to pay any significant increase in taxes. I can tolerate the proposed "temporary" taxes however I simply could not pay dramatically higher taxes as a result of reassessments. Why on earth do you think real estate taxes are a more equitable way of taxing? Sales taxes are far easier for the public to bear. You can manage your personal expenses but you can not avoid your property tax bill (though thousands of Philadelphians are evidently doing so). The wage tax affects those who have jobs. They are in a better position to pay than those who are unemployed or underemployed. And then there are the elderly on fixed incomes. High real estate taxes simply punish one sector of the society while making our neighborhoods all the more class oriented. I am at risk of losing my home because of the likelihood of huge tax increases due to reassessments. I may be forced to sell in a depressed market. Is this your idea of Christianity? I advise you to think a bit harder about the consequences of your ideas.
# posted by Anonymous Anonymous : 8:12 AM


Dear Anonymous,

Excellent - finally some disagreement! For all the dreck I put out, I was beginning to wonder if anyone was critically reading what I was writing. Thank you for your comments, as well as for your perspective. I appreciate both, and hope that you'll take the comments below in the spirit of healthy discourse and mutual sharpening.

You should know that, when actual value assessment is instituted, I am likely to have my property taxes triple (!). And yet, I am for it. Think of what happens when real values get out of line with assessed values: hot places like University City pay less than they should, and as a result, dead places like where most of the poorest people in Philadelphia live pay more than they should. That is hardly an equitable system that should be allowed to continue just because those who live in high-flying neighborhoods have the political power to oppose any change, and/or those who live in run-down neighborhoods have been falsely instructed that actual value assessment will lead to higher property tax bills. In fact, what is likely going to happen is that actual value assessment will cause prices in higher-growth areas to cool off temporarily, and prices in lower-growth areas to start to rise for the first time in awhile; this would then narrow and not widen the stratification of neighborhoods within the City.

(By the way, consider three additional positives about actual value assessment. First, when housing prices decline, property tax bills will also adjust and decline; so there's some built-in relief right there. Second, since assessed values don't currently reflect actual values, the City has no incentive to make positive investments in neighborhoods and then pay for them over time with the extra property tax revenues generated by these enhancements; with actual value assessment, they could do this all the time, either formally through tax increment financing or informally through the annual capital budget. Third, the flip side of the previous point is true: the City is at present insufficiently disincentivized from having bad things happen to neighborhoods, since declines in market values won't adversely affect property tax revenues.)

But my post wasn't about reassessments, which would be revenue-neutral to the City; it was about getting more out of property taxes in general, and less out of other sources, like sales taxes, business taxes, and wage taxes. Here, I have to disagree with you that sales taxes are easier for the public to bear; even with all the exemptions, sales taxes are far more regressive in nature, since taxable consumption represents a higher proportion of expenditures for poorer people than for richer people. And business and wage tax bases are the most mobile, and thus lowering those rates at a local level have been shown to be the most effective in attracting more employers and more employees (and, conversely, raising those rates is the most effective way to shoo them away and thus cause even more job losses and economic contraction; take the non-City side of City Line Avenue and the flight of the professional class to the suburbs as two notable examples).

All taxes are painful; but municipalities have generate revenue somewhere to have the funds to dispense towards public services. And property taxes are the most equitable and least distortive, in terms of who bears the pain (since property ownership is the best barometer for wealth) and how people respond to them (since you can't move a house outside of city limits).

To be sure, it's painful to get that tax bill all at once, which is probably why property taxes are of all taxes most vilified. And, to be sure, senior citizens on fixed income will take a hit, and it therefore probably makes sense to offer them some sort of exemption or relief.

And, to be sure, homeowners will take a hit; but who ever said that everyone has to be a homeowner? We probably actually have too much homeownership in this country than is optimal, between subsidizing it via the mortgage interest deduction and having very loose lending for most of this decade. There is nothing wrong with renting, and in fact there probably needs to be a little bit more renting than there currently is, both to make the cost of housing more affordable for more people as well as to make our workforce more flexible when it comes to moving around to adjust to the spatial changes in job distribution associated with an economy in transition to a more knowledge-based core.

All of that said, there are two sides to every story, and I understand where you're coming from and that you'd suffer personal pain if property taxes were hiked. And hey, I've just told you that I'm for a change that would cause my property tax bill to triple AND lead to declines in my house price; so clearly, it's reasonable to wonder if someone as insane as that can squeeze out a sensible argument. But I do believe that, looking at things outside of my own personal gains and losses, there is a legitimate, faith-based, equity-seeking case to be made for both actual value assessment and for generating more revenue out of property taxes so that we can experience less pain in other tax categories.

Thanks again for your feedback and your insight.
# posted by Blogger LH : 5:19 AM
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