Now
that the primary is over and we know who will be
on the ballot in November, it is time to get
serious about the issues that should be the
focus of the campaign.
There
are three critical areas related to human
settlement patterns where state government could
and should have a major positive impact over the
next four years. These issues have not yet been
seriously addressed by any candidate who will be
on the ballot in November. A lot of lip service
and hollow rhetoric, yes. Serious consideration,
no.
The
critical
issues?
All
three
are on almost every voter's
mind. At least these issues are of grave concern
to the 80 percent of Virginia’s citizens who
live in the urban regions of the Commonwealth.
Two of the issues (mobility and shelter) involve
governance services and functions that are
controlled by the Commonwealth directly or
indirectly -- “indirectly” due to the
state’s responsibility for the existence, and
structure of sub-state (aka, municipal)
governance. The state has responsibility either
by statute, granting charters, or by being “Dilloned.”
The buck stops at the state on access and
mobility, and on shelter.
The
third critical area of concern, the residential
property tax–and by extension the entire
system of financing governance functions–is
also a state government responsibility under the
United States constitution. Because tax reform
opens the door to fundamental reform of
governance, we will start there.
This
column, the first of three on campaign issues,
addresses
the property tax, specifically the tax on owner
occupied residential property. The entire tax
structure must be rebuilt to meet 21st century
reality but the flash point and the invitation
to counterproductive, short-term “political
solutions” is the residential property tax.
Like
the “Car Tax” of eight years ago,
“Property Tax Relief” is likely to become
the sound bite poster child that drives the
election with the net probable result of no real
solutions and many new problems.
As
a recent Washington Post headline put it
“Governor’s Race in Virginia Spotlights Tax
Relief.” The first step is to understand the
issue is tax reform, not tax relief.
Fair, comprehensive tax reform will provide
“relief” across the board, not just sops for
squeaking wheels and escape hatches for
pandering politicians.
Context
In
Virginia, the Governor is limited to one four-year
term. That is not a lot of time to achieve
Fundamental Change in a complex area like
governance revenue. There are two alternatives:
Whine about the short time frame and argue the
merits of a constitutional amendment, or start
now and outline specific, detailed plans for
what a candidate for office will do so that
voters can elect individuals based on an action
agenda, not slogans.
What
will you do?
Who
will you appoint to do it?
What
are the overarching principles that you
believe should guide Fundamental Change in the
tax structure?
The
problem in the past has been that the leaders of
the two-party dictatorship have conspired to
avoid any specifics so voters have no basis for
choice beyond platitudes. This year three
candidates are running for governor so the
stakes are higher. A word to the wise: Spell out
a specific, realistic, broad-based agenda or
come in third.
The
two Lt. Governor candidates are unabashedly
running to be candidates for governor in 2009.
They can win even if the person at the top of
their party’s ticket does not win. So, if the
three governor candidates try to hide, the Lt.
Governor candidates should step out with a
specific program. It will be up to the media
(mainstream and internet based)
to keep candidates from putting out more of the
“weak stuff” that has been on the table
during the run-up to the Primary elections.
Property
Tax Background
Any
discussion of the current situation must start
with the fact that the whole idea of a
“property tax” is one that made sense as a
revenue source to support major governance
functions two centuries ago but has little
positive relevance now. The “property tax,”
especially a tax on owner-occupied residential
property is an historical anachronism. It was
useful when 95 percent of the households were
non-urban and owning land was not just the
primary measure of wealth, it was the resource
that was used to earn money.
Even
those who owned an urban home likely lived in
the back or up stairs and ran their business or
profession out of a storefront or from a
workshop on the alley. The primary reason for a
tax on property, especially owner- occupied
residential property would be:
It
also needs to be noted that there is a
fundamental difference between owner-occupied
residential land and commercial land.
Rental residential dwellings are commercial
property for the landlord. Within a
comprehensive new revenue generation system,
owner-occupied dwellings could be treated as a
separate form of property.
Finally,
the so called “reforms” like California’s
Proposition 13 ceilings, rollbacks, homestead
exemptions and other crutches are not
“solutions.” They only add complexity to a
outmoded system of public revenue generation. The
only significant change that has been on any
table is Henry George/split rate tax for urban
land.
Posts
on Bacon's Rebellion Blog have detailed the
problems with the existing property tax
structure and documented the critical response
to the “solutions” put forward by candidates
so far.
Principles
There
are many potential paths to a better tax system
for the Commonwealth. It would be unwise for a
candidate to lay out a specific reform plan. It
is imperative that all three lay out a reform
process and the principals to guide that
process. Otherwise the tax issue will just be a
political foot ball.
The
place to start is for candidates to develop a
statement of principles about the tax structure
and have it ready by the end of August. There
are already a lot of good ideas in the public
domain. Jim Bacon and others have long supported
fundamental restructuring of the tax and in
Bacons Rebellion Blog has raised excellent
questions about of what to tax and how:
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Should
taxes and fees favor good behavior like
conservation, recycling, reduction of
consumption, creating a small ecological
footprint?
There
is good reason to support a broadly based tax on
energy consumption sometimes called a “carbon
tax.” We will be addressing a concept of a
“hydrogen economy” in a future column but
the “carbon tax” idea might better be an
“oxygen tax.” When oxygen is combined with
carbon compounds or with hydrogen to create
energy, the results have far reaching impact.
The issue is conservation of energy. You guessed
it, that means functional human settlement
patterns.
Flat
Earth, Flat fees and Expanding the Tax Base
without Creating Balanced Communities
Whatever
the specifics, a major goal must be to shift
from flat fees to use/consumption-based charges.
It will be important that taxes and fees reflect
the real location-variable cost of goods and
services that are required to support
contemporary life.
When
urban systems started expanding at an
accelerating rate following World War II, it was
assumed that the “cities” and “suburbs”
would continue to expand as they had in the
prior 40 years. As polycentric New Urban Regions
began to emerge with “Edge Cities” and other
new forms, the large municipal governments in
the northern Part of Virginia hit on a strategy
of attracting jobs to create “tax base” to
support the services demanded by the growing
population. This seemed to be working, for a
while.
The
Washington Posts's Peter Whorisky did a fine
job of documenting the demise of this tactic. In
a Page A-1 story on April 12, 2005 “Property
Owners’ Burden Rising: Home Taxes Cover Larger
Share of Government Costs,” Whorisky examined
the FY 2001 and FY 2006 year budgets for
Alexandria, Arlington, Fairfax, Loudoun and
Prince William.
The
percentage of these jurisdictions' budgets
supported by residential property tax went up an
average of 10.5 percent in this six -year
period. Loudoun County, which has grown at a
record pace, increased by 14.1 percent.
Fairfax
County which has developed by far the most
“tax base” land use now derives 48 percent
of its $385.5-million budget from residential
property taxes with a 12.6 percent rise in home
owner burden in just six years. The strategy to
“expand the tax base,” a program Fairfax
County pursued for 35 years, has turned out to
be not as wise as the plan to create Balanced
Communities which was the official strategy from
the mid-50s to the mid-60s.
Arlington
Alexandria, Fairfax, Loudoun, Prince William
reassess property tax each year and have used
the increased assessments to increase the
property tax. As far as can be determined from
the media, they apparently have not made it
clear to citizens as required by Virginia law
that they are in fact increasing the tax yield
beyond the 101 percent level through
reassessment.
Leave
the Political Weak Stuff Behind
As
they say at this time of the year, “Do not
come with any of that weak stuff.” Citizens
want real reform, not just political posturing.
Real tax reform should go hand in hand with
fundamental governance reform. Here the
principle is simple:
Move
controls, revenue sources and other decision
making to the level of impact.
This
means moving the focus of control--revenue to
support government and management--down from
state and up from municipality to the regional
scale.
The
New Urban Region (and the Urban Support Region)
are the fundamental building blocs of
contemporary society. But it also means moving
control and resources down from municipality to
new sub-municipal governance structures within
the Commonwealth’s three largest regions.
There are now municipal jurisdictions with one
million. That is “local” government?
Above
all, it must be kept in mind that governance of
an complex urban society costs money. Good
government cost a lot of money. Dysfunctional
government cost a lot more money. The next two
columns will focus on action agendas for
mobility and shelter that, along with reformed
tax policy and governance restructuring, will
encourage the evolution of functional human
settlement patterns.
--
June 20, 2005
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