Since the introduction of HB/SB 76 our bill has been criticized for being a tax shift. Replacing the funding currently received from the property tax has to come from somewhere. You do not simply get 13 billion dollars out of thin air. It will require a well-planned replacement revenue system. Our opponents call this a tax shift and in their telling they leave out a very important aspect of the story.
So let’s address this notion of a tax shift. In the process let’s do so by looking at the results of decades of tax shifting policies that exist as a result of the property tax. This is the part of the equation of “Tax-Shift” claiming opponents choose to ignore!
As we look at the current property tax situation the burden of funding education is a tax shift. It shifts responsibility and accountability to some while providing for loopholes, reductions and exemptions for others. Because it is based on assumed worth and not on actual ability to pay this can have a negative impact as we see in the 10,000 people a year losing their homes as a result of the tax. That number does not include home foreclosures and bankruptcy as a result of the inability to pay the property tax.
In that sense HB/SB 76 is taking a tax that is intended to fund education and making it the responsibility of everyone not just the responsibility of those hand-picked by government to pay the lion’s share. Remember that every home-owner who is paying property taxes is also paying Personal Income Tax and Sales Tax that is also used to fund education.The property owners contribution to education funding then becomes even greater.
In doing so, what we are accomplishing is the undoing of decades of tax shift policies that exist, in large part, because their is a property tax.
We know that the current shifting of taxes is making it harder for many homeowners to stay in their homes. Seniors on a limited income face the potential of losing their homes and going into assisted care facilities. The cost of living in these assisted care facilities is much greater than if that senior had been allowed to stay in their own home which, in many cases, is completely paid for. While they may be perfectly able to stay in their home and maintain that home, a tax has forced them to make a decision that will add to the tax burden of others. That is a forced decision that results in a tax shift that can be undone by HB/SB 76.
We also know that rent is rising at the same rate and, in some cases, higher than the rate of property tax increases. The direct connection between increasing rent and property taxes simply can’t be ignored. The increase of that rent for low-income families creates a need for special subsidized housing programs, Section 8 housing as well as adding to need for other forms of public assistance (programs like SNAP). Once again we see a forced decision in a tax that forces more people to become reliant on government programs that must be paid for by others. That is a tax shift as a result of property taxes.
Why would rent increase at a faster rate than the direct impact of increases associated to property?
The answer to that is simply because the rising property tax impacts the costs of the goods and services we all use. The landlord must keep up with the property tax or the renters will have no place to live. Because of the cascade effect of property taxes, the cost to the landlord in maintaining those properties also increased. The hardware, carpet, lumber and appliance stores all pay property taxes that impact the cost of the goods and services that are needed to maintain their properties. That higher cost is going to be reflected in the rent. That is another forced tax shift as the result of property taxes that results in higher rent.
This also applies to homeowners. If the home-owners finds themselves in a position of choosing between paying the property tax and doing necessary maintenance of their homes, the property tax wins out. It makes no sense in adding to the cost of the home in maintaining it if you know that the government is eventually going to step in and take that home from you. This adds to the problem of blighted neighborhoods but that’s okay because the government has more tax shifting programs ready to provide revenue to communities to deal with blighted properties. It’s just another tax shift that again is a forced decision regulated by a tax, not by ability to pay.
It should be added here that home-owners may simply choose to avoid making upgrades on maintaining their property because they fear higher taxes as a result. In many areas of the state school districts do spot assessments that target homes that made improvement on their property. Even though that improvement has nothing to do with the cost of education or the home-owner may have scrimped to save for a long period of time to put the money together to make that improvement, this all becomes irrelevant. It is simply assumed that a higher burden of taxation can be levied on that home-owner because they could afford to make an improvement on their property. That is a tax shifting policy.
It exposes something related to the problems associated with homes and assumed worth. If that same homeowner decides to use that money to go on a vacation or spend in other areas not related to the improvement of their homes they have no risk of higher property taxes but because they improved their homes, making their neighborhoods a more attractive place to live, they face higher taxes.
Because of the high cost of the property tax many young families can’t make that step to home-ownership and become forced into living in rental properties. Where they might be able to meet the obligations of a mortgage, the property tax keeps them from being able to make that purchase. As a result they find themselves paying rent in a home that is more expensive than a mortgage on a similar property. The reason the rent is higher is due, in part, because of the property tax. That is a tax shift as a result of the property taxes.
As taxes increases many renters find themselves unable to keep up with the higher rent which forces them to make a decision to relocate. This creates an instability in the classroom that adds to the cost of education. That additional cost translates into a need for yet another tax shift that could be stabilized if those families were allowed to remain in their homes. For many of these low-income families it also means finding a smaller place to live or to consider partnering with other families in their rented homes leading to overcrowding and more instability in their home life. The number of ways this impacts the cost of education is a story for another blog posting.
One of the tools government uses to attract new businesses into an area of the state is through KOZs (Keystone Opportunity Zone) and LERTAs (Local Economic Revitalization Tax Assistance). While these programs attract businesses and help with jobs, the programs also shift the responsibility of paying the property tax to others. We are told that this is an investment in the future of our community, albeit one leveraged by government and not free-market principles. In many cases, once the tax abatement period has ended those businesses often move elsewhere. The investment made by taxpayers is lost and so are the jobs in that community. That impacts local earned income tax revenue. The end result is yet another tax shift as a result of the property taxes.
In the shifting of those taxes, the new business operating under KOZ and LERTA programs has an economic advantage over established business that have been contributing to the economy of the local community. For smaller established businesses it can have the impact of hurting their business enough that they can no longer afford to stay in business. All this happens because of the need to use a tax shifting government program to attract new business that would not be necessary if the property tax were eliminated for everyone.
As was discussed in another blog posting. The property tax has a cascade effect that impacts the price of everything we purchase. All the goods we use are made in a production facility that pays the property tax. That includes our food and clothing. At every stage of that production in different facilities, the property tax is applied adding to the total cost of the products we use. Again we are shifting those costs to the consumer and that represents yet another tax shift.
As farmers find themselves on land needed to grow crops and raise livestock they also see property taxes soaring. As a result the government has enacted clean and green programs to lower the cost of the property tax on that land. While these programs are necessary to keep the farmer on their farm, they are only necessary because of the property tax. That reduction in their taxes creates a shortfall in the revenue collected and has to be made up by taxing others. The burden is shifted to others in yet one more tax shift.
In every case these additional expenses on the cost of living for the average working family is because we have a corporate and governmental system that insists on protecting the status quo of the property tax. In every case everything we purchase becomes more expensive because of the way the property tax works. It creates more need of more government programs in subsidizing others adding to the cost of government resulting in the need for more taxes.
HB/SB 76 would put an end to all of these additional costs as a result of the rising school property tax. It would kill the continual need for tax shifting because they refuse to accept the reality of the property tax in its impact in the lives of working families.
It becomes even more egregious because property tax is based on an estimated (and therefore inaccurate) worth associated to a home and not on the individual’s ability to pay. That is the reason behind the need for the government programs that offset the burden of the property tax. We are told that constant reassessments are needed to keep the property tax fair and yet in every county-wide reassessment, which carries costs in the millions, the appeals process begins continually demonstrating the inability of an assessment to accurately estimate the value of property. The additional cost to property owners of these reassessments is only necessary because we have a property tax. It’s another tax shift passed on to property owners to pay to ineffectually make the property tax fair.
If the assessed value of your property is more than you can sell your home for, you are paying property taxes on property you don’t actually own. Those who seek to protect the status quo are perfectly fine with this. Those who seek to protect the status quo are perfectly fine with the myriad of tax shifts that occur because there is a property tax. And yet those same people tell us they will not support HB/SB 76 because it represents a tax shift.
HB/SB 76 is based on ability to pay. HB/SB 76 understands that funding education is important and it should be the responsibility of everyone, not just shifting the burden on to some. HB/SB 76 would turn the whole state into a permanent KOZ attracting new businesses without the need of government incentive. Not only that but those businesses would remain in place creating more economic stability. HB/SB 76 would eliminate the need for higher and higher rent as a result of higher and higher property taxes. Rather than growing to need for more rent subsidies and programs we could shrink that base while, at the same time, making home ownership to these families more affordable.
HB/SB 76 would create homeowners who establish roots in their communities. Those roots are essential in maintaining economic stability in a community as well as reducing the cost of education as a result of the problems related to transient rental populations in our schools.
You see, in the end it is the existing system that is the tax shift. In the end, the other government programs created to try and put band-aids on the problem rather than actually fix the problem just generates more tax shifting. HB/SB 76 is an attempt to put an end to much of this. It is the correction of a system built on tax shifting policies to create stability and projectable income in budgeting for the future.
Yes, we need to go to a more stable revenue stream for the tax payer. In that sense it is a tax shift. In reality though, HBSB 76 undoes decades of tax shifting policies. It corrects it. Using the “Tax Shift” excuse is just that, an excuse because it chooses to ignore the perpetuation of tax shifting that takes places under the current unsustainable system of education funding.
That’s what they want you to ignore. It’s the part of the tax shifting rhetoric they are unwilling to address.
HB/SB 76, as confirmed by the Independent Fiscal Office, is revenue neutral unlike the the decades of of tax shifting policies that exist as a result of property taxes. As a revenue neutral bill it is not a tax increase unlike the many programs that exist because of the property tax that actually do increase taxes and add to the cost of living.
By correcting the decades of tax-shifting policies we can see lower costs for all of us in the long run. Or we can continue down this path of creating more need for more government programs which creates more need for more government revenue which means higher taxes for all of us. That is the option the status quo is protecting!