Property Taxes: Not All Bad

I always liked that old saw, “the devil’s in the details,” because it is so often so true, and if there were a poster boy for the concept, it would be property taxes. Property taxes have the potential of providing fair, equitable, and stable funding for many of the social services that contribute to a better quality of life for working families. At the same time, the basic principles of property taxation can be deliberately twisted and obfuscated in a welter of technical gibberish, hiding the actual use of property taxation to heavily tax low and moderate income families, while letting corporate and wealthy property owners pay less than their share. Moreover, the actual fact of inequitable and unfair property taxes, or the manufactured perception of unfairness, can be used as a club to move public opinion and policy makers to propose “solutions,” such as sales taxes, that have the potential to be even more inequitable and unfair to working families.

This is a lot to bite off at one time, so I suggest that we take a look at various aspects of property taxes over time, in a periodic series of blog entries. This first one will begin a review of a few resources and current issues on the way toward a better understanding of the real potential of property taxes. Much of the discussion will focus on the Municipality of Anchorage, however the principles are fairly universal and can be of use in almost any public arena where property taxes are a current or proposed revenue producer. The following is the introductory paragraph from the home page of the Anchorage Real Property Tax Information Web Site:

The Municipality of Anchorage provides a variety of services to its citizens. These services are funded in part by Real Estate, Personal Property and Business Property taxes. There are over 90,000 Real Property parcels within the Municipality of Anchorage that covers over 1,900 square miles of land. The tax section staff of four is responsible for billing and collecting these property taxes. In the prior tax year 2004 the tax section mailed out over 109,000 tax bills and collected approximately $335,593,280 on behalf of General Government and the Anchorage School District.

Clearly, there is a lot of property and revenue involved in this massive effort to generate revenue for the Municipality. Every resident of the Anchorage bowl, whether they own property or not, is affected directly or indirectly by the levying of property taxes. By the way, there is quite a bit of practical and useful information on this site for property owners, so I recommend a visit. Meanwhile, a recent press release noted that:

Reps. Berta Gardner and Les Gara and Sen. Johnny Ellis, all D-Anchorage, announced today [November 7, 2005] that they will file a bill to share $69 million of state surplus funds with communities throughout Alaska.

“When Governor Murkowski ended 25 years of state revenue sharing, he put pressure on communities to raise taxes,” Representative Gara said. “The state can afford to help communities provide for local property tax relief and essential local services.”

High oil prices are predicted to give the state a surplus of around $1 billion next year. According to the Department of Revenue, each addition $1 a barrel brings in $69 million.
“We think the state can afford to share $1 of this windfall with local communities,” Representative Gardner said.

The Municipality of Anchorage estimates that this proposal would reduce property taxes by about seven percent. The important question not addressed in this press release is, reduce property taxes for whom? Would the reduction reduce property taxes in such a way that corporations would benefit more than working families? Would those most in need of tax relief, such as low income seniors, be targeted for more favorable treatment? These are important questions, questions of “detail,” but they are not really addressed in the press release.

Some members of the Anchorage Assembly are eager to institute a sales tax that would presumably provide property tax relief. A recent article in the Anchorage Daily News noted that…

Anchorage Assembly members pushing a city sales tax took heart from a public opinion poll that indicated 56 percent of voters support at least one version: a 3 percent tax on goods, with exemptions for food, medicine and rent.
The Assembly commissioned the poll to gauge public support as it considers putting a tax question on the April city ballot. Assemblyman Dan Coffey has proposed putting a 3 percent sales tax on the April city election ballot. He says it would be used to offset 25 percent of property taxes.

However in the same article,

University of Alaska economics professor P.J. Hill said sales taxes typically take a higher proportion of poor people’s incomes, compared to those who are well off…

Hill said he can’t understand why anyone would want to replace a proportional tax like a property tax with one that hits lower income people harder.

“It’s not as if property is taxed heavily here,” he said.

More on this subject to follow in subsequent blog postings…

ldw

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Posted on December 20, 2005, in Tax Policy. Bookmark the permalink. 3 Comments.

  1. Keep a wary eye on the Coffey/Sulllivan tax proposals. They are going to be heard by the Anchorage Assembly on January 24th and six members will decide if they go on the ballot in April.

    Assembly Debate will focus on exemptions and whether to expand the tax to include services.

    The most important issues are, of course, who really are going to benefit (obviously, the more property you own, the sweeter the break) and who gets “hosed”. Renters who do not own property and seniors who already benefit from a $125,000 may actually bear a higher tax burden at the end of the day.

    What I fear most, however is general apathy: Flush with poll results purchased at taxpayers’ expense and which they believe show the measure will pass, assembly “conservatives” seem likely to send the measure to voters unless they hear from the public. If the public does not speak out, well, they get what they deserve, and for seniors and renters, its higher taxess.

    Allan Tesche
    Anchorage Assembly

  2. I agree with Mr. Tesche. In my opinion, the greatest beneficiaries of a sales tax and the resulting temporary (yes I said temporary!) dip in property taxes will be the builders of these condominiums that: (a) look like kennels without wheels; (b) few buyers seem to want; and (c) seem to be proliferating like a social disease around Anchorage.

    I think the real intent behind the sales tax appeared in the “Anchorage Daily News” January 31, 2006: “…Also, a financial consultant hired by the Assembly to review Anchorage’s bonding capacity told members that adding another type of tax could lead bond ratings agencies to bump up the city’s rating, allowing it to market more bonds.”

    Think about that, folks. Who do you suppose will be stuck with the bill for “…market more bonds”?

  3. On Valentines Day it was reported in the ADN that Assemblyman Coffee has withdrawn his sales tax proposal and Assemblyman Sullivan’s proposal doesn’t have critical support to make it to the ballot. Assemblyman Teshe heartily endorsed that decision.

    This doesn’t change the fact many property owners in Anchorage expect relief from the sharp increases they have experienced under Mark Begich, and Mayor Candidate Jack Frost has made some pretty good arguments for bringing certain funds back under the tax cap, passed by the voters 23 years ago.

    Additionally, I think the condos that are being built–so people can become homeowners and pay property taxes–beat the hell out of mobile homes that used to be the entry level for many newcomers and young Alaskans. If people don’t want condominiums, builders wouldn’t be able to get financing for them, and real estate agents wouldn’t be selling them as fast as they are built. On the other hand, the mobile homes that proliferated in Anchorage on random vacant lots during the 1950′s and 1960′s–and in glamorous places like “Alaska Village” and “Penland Park” to name only a few such eyesores–really did look like kennels WITH wheels.

    Respectfully,
    Donn Liston

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