Here is an article I wrote in October of 2006. It may have a few outdated references. But the points address the current suggestions of some politicians to grant local taxing authority. It is not a bad idea in and of itself. What is bad are the methods they propose. The bottom line is that politicians do not want to give up the cash cow of the property tax. They depend on it to cover the cost of profligate spending.
Local Taxing Authority - the Right Way and the Wrong Way
Thank you to Thomas McMahon for giving us the fuller picture regarding supposed cost savings to be gained through consolidating local school districts (Asbury Park Press County school districts won’t assure cost savings, 10/3/06 http://www.app.com/apps/pbcs.dll/article?AID=/20061003/OPINION/610030306/1030). His article serves as a warning for us not to mindlessly accept over-simplified solutions to high property taxes. Politicians are so inclined to sound bites over substance and to then believing themselves that we are in jeopardy of not really getting anywhere than to the governor’s capitulation of a reduced rate of property tax increases.
Buying into insubstantial fixes like consolidation is also why we must not allow the latest proposal of allowing localities to impose there own taxes to go down the wrong road. Builder fees and local sales taxes are gaining traction, according to recent reporting. We must scrutinize these ideas.
Builder fees may add tax revenue but they have severe shortcomings. They are not reoccurring. Homes and offices are built once. Areas that are built out would have limited, short-term benefit. As for towns that are built out, just as they are driven to chase ratables so as to increase property tax revenue, the thirst for builder fees would encourage more unneeded development and, likely, further abuse of eminent domain. Those not built out would be encouraged to do so with a vengence as they also chase more tax revenue.
Local sales taxes are equally problematic. They do not ensure tax revenue would remain local. Who shops exclusively in their own town? In fact, towns with a mall would see a windfall at the expense of other towns. On the other hand, unless every locality enacts a sales tax, people would be encouraged to spend their money where there is no or lower sales taxes. This would in turn harm businesses in the shunned town or simply drive all towns to enact a local sales tax. What an unhelpful and confusing mess.
We ask would local sales taxes be mandated to offset dollar for dollar local property taxes? We all know how politicians find ways to spend additional income rather than using it to reduce taxes. Does anyone believe things will be any different this time? Even with a mandate offset, they will find ways around it.
The sales tax is regressive. It begins with the first dollar you spend. That is, it forces those at the bottom and least able to afford it to pay more taxes. There was a huge uproar over raising the state sales tax 1%. Will the arguments against doing that be any less applicable when there is a two, three or four percent local sales tax?
The idea of local taxing authority is good. The methods proposed are not. What needs to be implemented is a local income tax. And it ought to replace the local property tax. Local taxpayers’ taxes will then remain local.
More importantly, fundamental fairness will be brought to tax funding of local schools and government. With an income tax, those who are struggling to get by on fixed or reduced income will no longer be burdened with carrying an inordinate share of local taxes. It will also eliminate the inequity of the low income taxpayer being imputed with an ability to afford more taxes just because his neighbor’s income means he lives in a “rich” district.
Therefore, local taxing authority can be a solution to inequities in the property tax. But that will only be as long as it is restricted to an income tax. Other kinds of taxes are illusions, non-solutions or will only shift the tax burden from one unfair method to another.
Wednesday, June 11, 2008
Friday, June 06, 2008
There is no substitute for a substitue
Recently, N.J. legislators have suggested localities be given authority to collect taxes in addition to the property tax. The idea is that the revenue would be used to reduce reliance on the property tax.
Immediately there were cries of outrage and condemnation. The essence of the complaint is that given another tax to collect, politicians will only take more and increase spending more. That is, the ostensible goal of reducing property taxes will fall by the wayside whenever there is more money coming into local treasuries.
Of course, this knee-jerk reaction has a point. Unless there were an iron clad rule that mandated all new taxes would go directly to reducing property taxes, these fears would materialize sooner than later. The only way to ensure reduction of property taxes would be to include a freeze of all property taxes with a corresponding mandate to use any increases in revenue to dollar for dollar reduction.
But even if such restrictions were put on, doubtless, politicians would still find ways to get around it. The governor has already shown us the prime example of this. He increased the caps on school budget increases from 3.5% to four percent. How could we guarantee such would not end up happening?
These realities are one more reason that the only way to address the inherent unfair nature of the property tax is to eliminate it completely. As long as it is there as a sponge to soak up uncontrolled government spending—especially at the state level—this tax will never be reduced to levels that it’s inequity would exist but be negligible when it comes to its affect upon those least able to afford it.
Eliminate the property tax by replacing it with a local income tax and watch what happens. Just as politicians are loath to raise the state income tax, so they would be any local versions. People would not stand for it. And if the authority to increase it required approval from Trenton then it would really seldom if ever happen.
Right now Trenton politicians have driven local taxes higher by their failure to control spending at the state level, as well as by the various mandates and preferential distribution of local aid to certain localities. They have forced localities to continuously increase property taxes without really being held directly responsible. When they are held accountable for increases in local taxes because they have to approve increases in local rates, you will find they suddenly see the light. Re-election and remaining in power is more important.
This is just one more reason the elimination of the property tax must be the stepping stone to reform of out of control government spending and mandates. If we do not begin here, we will never end the problem of high taxes and runaway spending.
Immediately there were cries of outrage and condemnation. The essence of the complaint is that given another tax to collect, politicians will only take more and increase spending more. That is, the ostensible goal of reducing property taxes will fall by the wayside whenever there is more money coming into local treasuries.
Of course, this knee-jerk reaction has a point. Unless there were an iron clad rule that mandated all new taxes would go directly to reducing property taxes, these fears would materialize sooner than later. The only way to ensure reduction of property taxes would be to include a freeze of all property taxes with a corresponding mandate to use any increases in revenue to dollar for dollar reduction.
But even if such restrictions were put on, doubtless, politicians would still find ways to get around it. The governor has already shown us the prime example of this. He increased the caps on school budget increases from 3.5% to four percent. How could we guarantee such would not end up happening?
These realities are one more reason that the only way to address the inherent unfair nature of the property tax is to eliminate it completely. As long as it is there as a sponge to soak up uncontrolled government spending—especially at the state level—this tax will never be reduced to levels that it’s inequity would exist but be negligible when it comes to its affect upon those least able to afford it.
Eliminate the property tax by replacing it with a local income tax and watch what happens. Just as politicians are loath to raise the state income tax, so they would be any local versions. People would not stand for it. And if the authority to increase it required approval from Trenton then it would really seldom if ever happen.
Right now Trenton politicians have driven local taxes higher by their failure to control spending at the state level, as well as by the various mandates and preferential distribution of local aid to certain localities. They have forced localities to continuously increase property taxes without really being held directly responsible. When they are held accountable for increases in local taxes because they have to approve increases in local rates, you will find they suddenly see the light. Re-election and remaining in power is more important.
This is just one more reason the elimination of the property tax must be the stepping stone to reform of out of control government spending and mandates. If we do not begin here, we will never end the problem of high taxes and runaway spending.
Wednesday, June 04, 2008
Middletown BOE Fails Taxpayers Again
The following is about a local education budget. But there is no doubt the name of the town could be anywhere in New Jersey. Boards of education everywhere are no match for the teachers' union, who have huge resources and years of experience in rolling over well-intentioned volunteer citiczens who are no match for them.
Wednesday, 30 April 2008
To the Editor:
Once again the board of education has failed Middletown taxpayers. Once again they have caved in to the teachers’ union. And, once again, they have saddled taxpayers with an above inflation three-year contract.
The three-year contracts commits to increases averaging 4.5%, compounding out to be 14.1%.
Since 1992, inflation has never gotten above 3.39%. It mostly hovered in the twos, sometimes lower. Regardless of such facts, board after board has succumbed to the union, granting above inflation settlements every time.
Exacerbating this unwarranted decision is their failure to take into account skyrocketing health care. It went up 9% last year. There is no reduction in sight. Did the board factor that in when figuring the contract?
Why is the idea of holding the line or belt tightening in hard economic times such a foreign concept? Or are such ideas only good for a laugh at board meetings?
Here is a real world fact: I pay $5,168 (38%) toward health care premiums, while my employer (a Fortune 500 company) pays the rest (62%). My co-pays on top of this add a few thousand dollars more to my annual medical expenses. At retirement, no free health care; I can buy into their health plan.
This is the real world the taxpayer lives in. When are public employees going to be asked to live in the same world along with the rest of us? When is the board of education going to stop capitulating by agreeing to gravy train contracts that drive property taxes ever higher?
This historic ritual of giving away the store is what led to such deterioration of Middletown school facilities that we had to borrow well over $100,000,000 to fix them. Yes, ONE HUNDRED MILLION DOLLARS. The reason is obvious: When one part of the budget goes above the State cap then another part must absorb the difference; that is simple math. One wonders if the board ever paid attention in their math class when they attended school. Of course, maybe the fact that they pay no attention to the plight of the taxpayer answers that question.
Wednesday, 30 April 2008
To the Editor:
Once again the board of education has failed Middletown taxpayers. Once again they have caved in to the teachers’ union. And, once again, they have saddled taxpayers with an above inflation three-year contract.
The three-year contracts commits to increases averaging 4.5%, compounding out to be 14.1%.
Since 1992, inflation has never gotten above 3.39%. It mostly hovered in the twos, sometimes lower. Regardless of such facts, board after board has succumbed to the union, granting above inflation settlements every time.
Exacerbating this unwarranted decision is their failure to take into account skyrocketing health care. It went up 9% last year. There is no reduction in sight. Did the board factor that in when figuring the contract?
Why is the idea of holding the line or belt tightening in hard economic times such a foreign concept? Or are such ideas only good for a laugh at board meetings?
Here is a real world fact: I pay $5,168 (38%) toward health care premiums, while my employer (a Fortune 500 company) pays the rest (62%). My co-pays on top of this add a few thousand dollars more to my annual medical expenses. At retirement, no free health care; I can buy into their health plan.
This is the real world the taxpayer lives in. When are public employees going to be asked to live in the same world along with the rest of us? When is the board of education going to stop capitulating by agreeing to gravy train contracts that drive property taxes ever higher?
This historic ritual of giving away the store is what led to such deterioration of Middletown school facilities that we had to borrow well over $100,000,000 to fix them. Yes, ONE HUNDRED MILLION DOLLARS. The reason is obvious: When one part of the budget goes above the State cap then another part must absorb the difference; that is simple math. One wonders if the board ever paid attention in their math class when they attended school. Of course, maybe the fact that they pay no attention to the plight of the taxpayer answers that question.
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