Tuesday, May 26, 2009

The absurdity of the Property Tax

Here is a letter to the editor I recently had published in the Press (after I had to pare it down to their max of 300 words). It was in response to an editorial by couple of our illustrious Trenton legislators (Sarlo and Singer) who were "helping" NJ property taxpayers with legislation meant to make sure someone was not wrongly paying $100 (or some other absurdly insignificant amount) less than their neighbor just because they challenged their assesment and the other did not.

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What would Trenton say to a proposal to invert the income tax table? That is, take the highest rates and apply them to the lowest income bracket and apply the lowest rates to the highest income earners. Sound absurd? It is. But it is exactly what the property tax does.

Take the $7,000 average PT being paid by four hypothetical home owners living on the same street in homes assessed at the same value.

Those earning $35,000 pay 20% of their income;
those earning $70,000 pay 10%;
earn $140K to pay only 5%;
be a retiree with $21K in fixed income and you pay a whopping 33%.
Lose your job and you are using your savings (a negative percent).

No other tax--especially of such a large amount--is required to be paid if either, one, there is no income or, two, if one chooses not to spend their money. The IRS does not knock on your door and say, "You paid $5,000 in income tax last year, so fork it over again now (even though you are not working)." Nor will you pay that $1,400 sales tax on that $20K car if you do not buy it. Nevertheless, if you own a home, you are required to fork over that tax which is the single largest or second largest tax a person pays at a rate of five to six times those greater means.

The example above does not having anyone paying any more tax than anyone else. But it does show how one taxpayer--the one with the least means and the greatest need for every penny they have--pays at a rate five to six times their neighbor (who, in the example, is not extrememly wealthy). In effect, they are subsidizing those at the top by paying a larger share based on ability to pay (the way the income tax works).

Is this fair? Can this be just? Obviously not.

So, this is the disparity Trenton should be concerned about, not that one person challenged their assesment and is paying maybe $100 less than their neighbor.

These legislators say they are concerned about fairness. They state that several times in their editorial. If they really were interested in tax equity, they would work to eliminate the PT, not tinker with it. Their efforts will do nothing to address the inhernent inequity of the PT.