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As Long as We Remember...

July 21, 2005

Restructure Our Tax System

Tony Soltero

They say the definition of "mixed feelings" is watching your mother-in-law backing your Mercedes off a cliff. That's certainly a good illustration for many, but all joking aside, there are few events that stir up conflicting emotions the way real-estate assessments do for those of us who own property.

Every couple of weeks or so I get a flyer from a local real-estate sellers' service that lists some of the recent transactions around my area. And to paraphrase Mick Jagger, don't you know that housing values in the Frederick area are going up, up, UP, UP!!! I see the amounts involved, and I find myself whipsawed between the thrill of seeing the value of my property soar and the agony of the looming tax assessment that's coming down the pike as a result. And with their usual remarkable efficiency in these matters, the city and county mailed out their spanking new tax bills a couple of weeks ago, right on schedule.

As the Frederick News-Post reported Sunday, many Fredericktonians opened the envelopes and quickly recoiled in horror. Many longtime residents are now facing the real threat of being priced out of the only homes they've known for years, if not decades – houses that they've PAID OFF!!! What is wrong with this picture?

We all know taxes are a necessary evil. Republicans tend to dwell on the "evil" part and Democrats point out the "necessary" part, but – let’s face it – none of us really LIKES taxes. But most of us like even less doing without schools, roads, clean air and water, police protection, and other services, so we grit our teeth and pony up. The alternative is to live like a third-world banana republic. And, trust me, I've been to a couple of those low-tax, low-service countries. There's a reason they're places people struggle to emigrate from.

But there is something seriously askew when we find ourselves in a situation where we can't afford to pay our tax bills. Shades of King John! And this is a function of the over-dependence on property taxes that the state and county have developed to fund services. When taxes are based on anything other than income (that is, ability to pay), we wind up with the nightmare scenarios of senior citizens on fixed incomes forced to abandon properties they've owned most of their lives.

It's not right to force homeowners to pay taxes on unrealized economic gains. The increased assessments are only on paper, but the taxes are real. The outcomes can be heartbreaking for many.

To be fair, the city did try to mitigate the damage with a few counter-proposals, which involved deferring tax assessments on unrealized gains until the property got sold (i.e., the gains were realized).

That unfortunately didn't catch on, though it's not obvious why – given the fast-rising property values around here, any tax increases could have been easily absorbed at the time of sale with the seller still pocketing a tidy profit.

But there are other ideas floating around. County Commissioner Jan Gardner is on the right track when she mentions in the News-Post article that "we should step back and look at transforming our tax policy to be less dependent on property taxes." She goes on to state that we might be wise to shift to a more income-based tax policy.

This is the way to go. One is never in a position where one can't afford to pay an income-based tax. If you hit a bad patch and lose your job, your tax bill shrinks accordingly. A senior citizen homeowner living on Social Security and a pension need not worry about the dreaded July envelope driving her into a corrugated tin shack. And our services would remain fully funded and supported.

There are some in our government who cast themselves as "anti-tax" and have a phobia with income taxes – but they utter barely a peep when sales and property taxes appear on the radar. It's time to expose them – they’re not "anti-tax;" they're very much FOR taxes that disproportionately impact the poor, the middle class, and seniors on fixed incomes. We need to get over this selective reasoning.

Another reason for property-tax reform is that we also need to re-evaluate the relationship between property taxes and school funding. The relationship is not an inevitable one, and leads to gross inequities among school districts. It's nothing more than a bad habit. Children in low-income families deserve to have the same access to quality education that children from high-income families enjoy. Having a central pool for school funding at the state level would go a long way towards this goal.

But ultimately, we need to get away from the regressive taxation policies that serve as such an impediment to progress and adversely impact some of our most vulnerable citizens.

Our seniors have worked hard all their lives for what they have. They shouldn't have their retirement years ruined by opening their mailboxes on July 1st.

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