I Want Higher Property Taxes
Here's the problem I have with Mayor Nutter's plan to temporarily hike property taxes. Not that I think it's bad to hike this tax, although many are in this camp. Not that I am skeptical that this will be temporary, although many are in this camp.
No, my problem is that in saying that the hike is temporary, he curtails his ability to move us towards a mix of taxes in which property taxes contribute more and wage and business taxes less to the municipal budget. As I have written previously, of all the taxes out there, property taxes are the least distortive and most equitable; and yet, Philadelphia's property taxes are too low, relative to other, more distortive and inequitable sources.
At some point, some mayor is going to have to say the following: over the next decade, we're going to make this right. We're going to raise property taxes and lower wage and business taxes. The City is going to end up with about the same amount of money (i.e. it's going to be "revenue neutral"). Sure, there will be winners and losers, as there always is when there is reform. But the net result will be a taxing system that is fairer, stabler, and less painful to the very people and entities that are most mobile and most needed to be retained within our jurisdiction.
I don't know that Mayor Nutter can be that mayor. Now that he's called the property tax increase a temporary one, he'll doubly not want to turn around two years later and say, "Actually, I'd like to make it more permanent." And, maybe I'm alone in the entire city, but I think that's too bad.
Comments
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.
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.
“I observed that your attitude was noblesse oblige.” I was not previously familiar with this term so I had to look it up. Apparently, it can mean, neutrally, the notion that the richer you are, the more of a sense of debt you owe to society and to help others; and it can also connote, more pejoratively, a condescending attitude of the rich towards the poor.
I’m not sure in what context you mean the phrase. But I do concur that, within the context of Philadelphia as well as the rest of the world, I would consider myself materially rich; and that with that should come some sense of obligation to give back, and that I should do so in a way that is not demeaning or snobby.
I must confess I far too often fall short in both ways: both in not being as generous as I should be, as well as in being generous in ways that are more about uplifting myself than others. But I would consider myself, albeit with much need for improvement, at least aware of how to properly and faithfully conduct myself as a person who has been blessed with resources. And I would hope that my blog posts reflect that, that when I explore an issue I am not looking to advance causes that necessarily enrich myself but rather try to consider what is best for others and particularly the most marginalized and impoverished among us.
“I want to know your Christian justification for forcing me out of my home of many years because i DO NOT HAVE enough money to pay three times more tax.” Let’s be clear here. I wasn’t advocating that you pay three times more tax; I was noting that if actual value assessment, which I support, was to be enacted, then per Philadelphia Forward’s property tax calculator, I might have to pay three times more in property tax. This reflects the fact that I was lucky enough to buy a house at a time and in a location that subsequently appreciated rapidly. Your change in tax bill if actual value assessment is implemented would depend on when and for how much you bought it for, and how much it has appreciated or depreciated since then. In fact, if you are “underwater,” it is quite possible your tax bill would actually go down.
But remember what we were originally talking about: not actual value assessment but shifting tax burdens from sales/wage/business to property. So, depending on how much you make and buy, even if the City were to raise property tax rates, the reduction in the other tax rates might mean you end up with about the same overall bill if not lower. The “Christian justification” for recommending such a revenue-neutral shift between tax revenue sources is to move away from less equitable and more distortive taxes to more equitable and less distortive ones, for the overall benefit of society and commerce.
Does this mean there are none who would be adversely impacted from such a shift? Of course not: everyone will have to adjust, and some may bear a heavier burden, although hopefully those that do are in the best position to do so. The goal of representative government, even for an idealistic Christian like me, isn’t to please everyone or give them exactly what they want, but to manage all of the trade-offs in a way that is fairest to the most people, has the least amount of inequity and distortion, and allows for healthy growth that can provide opportunities for everyone. My take on how to best reach that sort of equilibrium is to ask more out of property taxes and less out of sales, wage, and business taxes.
“You have it. I don't. If I am forced to sell because of unreasonable taxes a high paid lawyer, doctor or other professional (like you) will come along and take over my home. Please tell me how there is a faith based justification for this.” I’m not sure what to make of this statement. To begin with, I wasn’t proposing that we raise taxes, but rather that we shift the mix around; so it’s not necessarily a given that your overall tax bill or mine would go up. If you are in fact forced to sell your house on account of an overall increase in tax burden, then that is certainly a hardship, especially if your property value has depreciated significantly.
But I’m not sure why selling to someone with lots of money is so infuriating to you. Whoever you’d sell your house to, rich or poor, wouldn’t be “taking it over,” but rather they’d be buying it from you at a mutually agreed upon price. They may have more leverage than you do because of present conditions, but that’s not a matter of injustice as much as it is the fact that because of falling prices, it’s a buyer’s market; so if you decide that at the same time you need to sell your current house, you want to buy another house instead of renting, you’ll have the same leverage in those negotiations.
There is certainly no faith based justification for the rich soaking the poor out of assets; the Bible is resoundingly voluminous and clear on how God feels about that. But I don’t see how that is what is happening or would happen.
I hope this clarifies my position for you. Thanks again for your comments.