Get Off My Property - Part 2

After two necessary sidetracks (Obama's unsurprising support for same-sex marriage and a short blog for Mothers Day, below) I return to the exciting topic of Real Estate Property Taxes.  In Part 1 of Get Off My Property I provided a history of the property tax and pointed out a number of problems with it.  There are "fairness" problems due to real estate property not approximating wealth or the ability to pay and there are problems implementing the tax equitably due to inherent flaws with assessments or valuations (including timeliness).  And not to mention that the whole exercise is expensive to implement and operate.

I concluded Part 1 by claiming that the real estate tax as a source of local government revenue has outlived its usefulness.  I promised (threatened?) to discuss abolishing property taxes.

Before I get too far I want to note two local occurrences subsequent to Part 1.  PA State Senator Wayne Fontana (D) introduced a bill that would allow either county councils/commissioners or voters in a referendum to eliminate property taxes.  It would allow local governments the option of implementing higher income and sales taxes and/or a fee based on the square footage of property. 

Then last week former Allegheny County Councilman Dave Fawcett wrote an op-ed and he proposed what he claimed was a more objective process to conduct reassessments. He wrote in the Pittsburgh Post-Gazette "[a]ssessments should be based upon the sales price of the home being assessed (not some comparable), adjusted for inflation....The price paid for the home, adjusted for inflation, would be presumed to be the property's current market value. This value could be additionally adjusted based on the previous year's sales in a defined geographical area in order to capture local market trends and account for places where values are changing in a manner that is out-of-step with the county average."

I like Senator Fontana's proposal to eliminate (almost) property taxes, but some aspects are scary.  Pennsylvanians have voted on so-called tax reform before and always voted it down, fearing the devil they don't know.  Most voters, rightly, found it unacceptable to vote for reduced property taxes in exchange for higher income taxes.  They all smelled a rat - that is, that in the not too distant future nothing was going to prevent local government bodies from increasing property taxes, resulting in property owners paying higher taxes across the board.

Fontana's inclusion of an optional per square foot property tax falls into the unacceptable.  Any effort at reform must prevent local governments the ability to raise future property taxes.  In other words, tax shifting needs to be an all or nothing proposition.

Dave Fawcett's proposal has some merit I suppose.  Maybe it would reduce the subjective nature of using comparables, but really it just reduces the subjectivity.  The inflation adjuster could be a can of worms.  It would not be sufficient to use the CPI, for example.  This does not reflect property price inflation. Further, we all know that property values in the county do not inflate uniformly.  That is why we have the current problems with reassessments.  Fawcett allows for some adjustments to capture local market trends, but isn't this again going to be subjective?

I have for years trumpeted the idea of abolishing property taxes for all the above mentioned reasons.  The common response then is what tax will local governments use?  I suggest either the earned income tax or personal income tax.  The earned income tax has the attraction of being easy to implement - nearly every municipality already uses it.  The personal income tax has the advantage of better reflecting a person's ability to pay (or wealth).

I acknowledge some issues with this reform proposal, but any shortcomings I think are far less a problem than what we live with now.

In abolishing property taxes, usually the question of commercial property comes up.  I have two ideas. Allow local governments to forgo taxing businesses within their boundaries.  Probably won't happen; but it could be a good way to bring businesses in that would provide jobs to citizens.  The other idea is, of course, locally tax the businesses' income.  This could get complicated, but it is doable.

Some people have pointed out to me that there are municipalities in the Commonwealth that don't have many full-time residents (e.g., resort areas or large farming or forest areas).  These few citizens would be carrying a heavy individual burden if local government relied on their income tax contributions to run government.  Well, could there be exceptions for these type of areas?

Perhaps Senator Fontana has a good idea about allowing counties the option of abolishing property taxes.  For those counties where the property tax better reflects wealth and the ability to pay allow them to keep it.  The great majority of counties in Pennsylvania would be better off without property taxes.  Maybe the optional route would get around another objection heard in Harrisburg: that many counties do not have the problems with property taxes or reassessments that western PA has and therefore they are not interested in so-called reform.

I would insist on an important proviso to Fontana's option.  Once the property tax is eliminated there is no going back.  Citizens must be assured that government is not trying to pull a fast one on them and later add on a property tax.

Are you ready for radical reform in local taxes?  Abolish property taxes. Let me know what you think.

Moms. Can't Live Without Them.

 "...But a woman who fears the Lord, she shall be praised." Proverbs 31:30b

My Mother, Sarah

I have been blessed by seeing two great moms in action, my mother and my wife.  My quasi-adopted daughter and my first-born daughter both are now mothers and doing wonderful jobs as mothers.  I mean jobs.  I am not an expert, but I don't think there is another more demanding, frustrating and exhilarating job as mother.

Can we appreciate the job mothers do enough? I don't think so.  We set aside a day to honor them and that's nice.  But unfortunately America does not seem to value mothers as it should.  Recently a political commentator inaccurately mused that Ann Romney had not "worked" a day in her life.  Obviously a thoughtless thing to say about a mother of five boys.

Incidentally, I understand Mrs. Romney has and continues to deal with Multiple Sclerosis (MS). In 2006 she received the MS Society Inspiration Award from the Central New England Chapter of the National MS Society.  The reason I mention it is because I am thinking of my mother who succumb to the disease a number of years ago.

My mother was a great encouragement to me.  When I was small boy she told me that I could do anything that I put my mind to.  What a priceless gift to give a child!  Because I loved and trusted my mother it wasn't until many years later that I had to consider the possibility that I might indeed have some limitations!  But this advise gave me such confidence as a boy that it lead to many useful successes that I could build on into adulthood.

My mother inspired each of her children, and for each of the seven she had a special bond. When my mother passed away I learned from my six siblings that each of them had thought they were my mother's favorite!

My mother wasn't especially political.  Like most suburban housewives of the time she shied away from talking politics in public.  It wasn't the polite thing to do.  Ever the encourager, she supported my political interests, though likely not all my political positions.  After I lost my third election she sent me a note of encouragement and a newspaper clipping of all of Abraham Lincoln's failures (political and business) before he was elected President.

I am sure many of you could share similar stories today about your mother.  Let me close this political blog by thanking all the mothers that have helped to make America the land where we are free (and encouraged) to pursue happiness.

Obama Devolves on Same-Sex Marriage

President Obama announced a couple of years ago that his view of same-sex marriage was evolving.  Wednesday he evolved, or better devolved.  He now supports same-sex marriage.

As only Obama can do with a straight face, he cited his Christian faith among the reasons for his decision.  It is being true to the Golden Rule, treating others as you want to be treated, that compels him to support same-sex marriage.  Funny, in his 2008 campaign Obama framed his opposition to same-sex marriage in Christian terms. “I believe that marriage is the union between a man and a woman. For me as a Christian, it’s also a sacred union. God’s in the mix.”

I guess his Christian faith has evolved, or devolved too. Before I get too far about the same-sex marriage issue let's address his contrived, convenient, and totally wrong application of scripture. (It's not his first.) Obama's application of the Golden Rule is misplaced and absurd.  If my neighbor kills his wife do I say to myself I must treat him like I want to be treated, therefore I support the action?  Of course not. I condemn the behavior and want justice to take its course.  I may apply the Golden Rule by treating him with dignity and fairness (even though our human nature says he he does not deserve it) as he tried for his crime. 

The Golden Rule does not excuse sin.  (Oh my, did I actually use that offensive three-letter word that we have no use for anymore?) The Golden Rule challenges us to treat others how we would want to be treated.  It is easier to think of self, but Christ invokes the Golden Rule to get us to think of others.
 
There are a lot of good, logical reasons to oppose same-sex marriage.  The traditional family has been the building block of society from the beginning of mankind.  Regardless of your religious perspective the union of male and female is natural.  It leads to the propagation of the species. To argue against human understanding that has stood for millenia and to argue against nature is irrational. There is the logical argument: there actually is no discrimination in regards to our marriage laws.  Any man or woman can marry - as long as a man marries a woman and a woman marries a man.  Homosexuals can marry, as long as they marry someone of the opposite sex. I could go on and many before me have debated the issue in these terms.  Let's get to the real issue.

We need to oppose same-sex marriage because God calls homosexual acts sin.  I say this in all humility and with the acknowledgement that I too am a sinner.  I repeat that God calls homosexuality sin and I say it with no malice to the sinner.  I did not make this up and I do not hold myself up as holier than another sinner, but I accept God's laws.  God provides a moral code for our own good. Society is better when it accepts God's laws.


The President spoke of committed gay couples that he knows and/or work for him.  These people love one another and are good citizens.  This may be true. Let's just say that 99% of practicing homosexuals have wonderful, endearing qualities. This does not negate that they also willfully disobey God with no repentance.  Because they are really committed to their relationship does not make it right.  Because they have good qualities does not require society to condone their bad behavior, or to legitimize it with a legal "marriage."

If I am a wonderful family man, but I steal from my neighbor are you going to condone my stealing? Or if I am a good public servant and I cheat on my wife are you going to think we need to change the laws to permit infidelity?

Fortunately President Obama's announcement in support of same-sex marriage has no effect on federal or state policy.  It is another warning shot to states like Pennsylvania that we need to pass a constitutional amendment that declares the obvious (yes, that is where we are): marriage is between one man and one woman.

When society accepts sin as normal we are committing a slow suicide.  Or maybe we have already slid down that slippery slope.  Accepting same-sex marriage is not evolving, Mr. President.  It is a devolution of what God created to be wholesome and good.

Get Off My Property - Part 1

Lady Godiva !

What is the difference between a taxidermist and a tax assessor? A taxidermist takes only your skin. ~ Mark Twain


Man has been using some sort of property tax since ancient times. Believe it or not, near the Acropolis there is a monument to the honest tax assessor, Aristides the Just. Easy to believe though, in Roman times assessors were no longer honored but considered evil and low class people who often required military escort. And how about in the 11th century - Lady Godiva rode naked on a horse through the streets of Coventry, England to protest the tax assessment her husband imposed on his tenants' property. She won an abatement.

By the beginning of the twentieth century, criticism of the uniform, universal property tax was widespread. Even a scholar of taxation (Seligman) called the tax one of the worst taxes ever used by a civilized nation.  

In 1902 the property tax provided forty-five percent of the general revenue received by state governments from their own sources. That percentage declined steadily, dropping the most between 1922 and 1942 as states adopted sales and income taxes. Today property taxes are an insignificant source of most states' tax revenue. For local governments the property tax as a percentage of own-source general revenue rose from 1902 until 1932 when it provided 85.2 percent of total general revenue. Since that time there has been a significant gradual decline in the importance of local property taxes.

There are a number of problems with the general property tax. Property taxes failed to deal with the problems resulting from differences between property as a legal term and wealth as an economic concept. When we had a simple rural economy wealth consisted largely of real property and tangible personal property -- land, buildings, machinery and livestock. In that economy, wealth and property are the same things, and most importantly, the ownership of property was closely correlated with income or ability to pay taxes.

However, in today's economy ownership and control of wealth is related to a variety of financial and legal instruments such as stocks, bonds, notes, and mortgages. These rights though may not be absolute; they may be shared with many others. It's not hard to guess that our our local property tax administrators lack the legal authority, skills, and resources needed to assess and collect taxes on such complex systems of property ownership.

There are increasing numbers of wage-earners and professional people who have substantial incomes but little property that make property ownership a less suitable measure of ability to pay taxes.

Then we come to problems with the assessments due to the inability or unwillingness of elected local assessors to value their neighbor’s property at full value. Let's face it, when property assessments are valued well below their market value and changed infrequently the tax assessor is our friend.  And if the assessor is an elected position he is more apt to be reelected.

Pennsylvania is one of six states that don’t require periodic assessments.  In some counties in Pennsylvania comprehensive real estate assessments haven't been done in years - or decades.  Of the commonwealth’s 67 counties, 22 have not reassessed since the mid-1980s. That includes four of Allegheny County’s neighbors.  Realize when property is not reassessed regularly inequities develop - usually with newer home purchasers carrying a heavier load than the old-timers.  And when the real estate market is rapidly climbing or falling old assessments easily become inaccurate.

In Allegheny County a judge stepped in and forced the reassessment.  Then politicians fell all over themselves to declare a horrible injustice.  They hollered "unfair" and pointed to other Pennsylvania counties that had not been subjected to this indecency. Of course, while the politicians were grand-standing about the unfairness of implementing reassessments residents were burdened with wildly inaccurate assessments.  The popular stand of our county politicians was to call for a freeze or a moratorium. In essence - kick the can down the road for more courageous politicians to deal with it.

It's true that modern day property assessments are very expensive for states or municipalities.  Allegheny County’s 2001 assessment cost $23.9 million and the 2010 assessment cost $12.4 million.   

Perhaps you have heard of places where assessments are done regularly with little fuss. There are some sophisticated mathematical models employed to the task. That's nice, but sometimes the new assessments aren't accurate. In a review by the Post-Gazette of the 2010 reassessment of Pittsburgh "treated expensive land and buildings gently, while overestimating the values of low-priced properties. The Allegheny County-run reassessment fell far short of the goal of distributing the tax burden fairly among owners of high-dollar properties and residents of modest homes."

One more argument.  Some activists and observers have recently called into question the justice or even constitutionality of real estate taxes.  They argue that owners of property are not really able to fully enjoy the property even after it has been paid for (say after a 30 year mortgage).  "Owners" are forced to continually pay the government to hold on to that property.  They are never secure in their property because of the property tax.  Some people describe it as renting the property from the government.  While I understand this argument, I don't totally buy it. (Owners do in fact substantially, even if not fully, enjoy their properties. They may dwell on the property, build a home, raise a family, or gain revenue through rents, etc.)

However, I am convinced for all the reasons above that the real estate tax as a source of local government revenue has outlived its usefulness. In my next blog I will discuss abolishing property taxes.

My Big Fat General Assembly

Downsizing the Pennsylvania General Assembly has been the target of reformers and even the State House recently.  The House passed a bill a couple of weeks ago that would shrink the House from 203 to 153 members.  The bill would also reduce the Senate from 50 to 38 members.

Why do we want to shrink the legislature?  Well, the reformers point out the PA General Assembly is America's Largest Full-Time state legislature.  Or as the title of the blog declares, it's "My Big Fat General Assembly."  The argument goes that the size of the legislature means exorbitant costs to the taxpayer, an out of touch behemoth, and likely contributes to corruption.

I'm going to go against the "reformers" and popular opinion on this one.  Let me say that I like My Big Fat General Assembly.  Not the corruption part.  Not the lack of backbone sometimes displayed. Not the failure to act on needed legislation such as reducing business taxes, school choice, privatizing the liquor stores, and others.  No, I like the representation that it gives the average citizen.  The good thing about a large General Assembly is we have relatively small house and senate districts.

I think the call for reducing the size of the General Assembly is the wrong solution to address the cost problem.  I understand arguments about the need to reduce cost in state government, and putting the General Assembly on a diet is a good idea.  While running the assembly takes something less than 2 percent of the budget, I'm all for action to reduce this cost. How about reducing benefits and pensions?  The pension system is ripe for reforms - the kinds that most businesses have implemented, such as defined contributions instead of defined benefits. 

Senate Majority Leader Dominic Pileggi supports the downsizing and said that lawmakers are asking others to do more with less, so "its important we're seen as doing our part."  I would agree and I want to take him at his word.  However, after reducing the number of legislators none of the remaining legislators (including Senator Pileggi) will be doing more with less.

The citizens of Pennsylvania are rightly frustrated with the General Assembly's corruption and ineffectiveness.  You add in the very difficult economic times and budget arguments and you can understand the bubbling up of calls for reform.  However, let's not overreact and reduce our representation to solve these problems!  No one really thinks that if there are less representatives these problems will go away.  As a matter of fact, reducing the number of members could put more power into leaders hands and lead to even more corruption. (Funny how the leaders are now thinking shrinking the General Assembly is not a bad idea.)

Under the bill passed by the House new districts would have about 20,000 more constituents than they do today.  There is no getting around your vote being watered down and the distance from your representative growing.  And I don't care that California has way more (maybe 4 times more) constituents per district than we do.  Do we really want to compare ourselves to them?

In recent polls, 76 percent of Pennsylvanians said they supported the idea of a smaller Legislature. Supposedly the House-approved bill has broad support from House and Senate members.  Please, let's put the brakes on this "reform" and keep our representatives closer to the people.

Term limits anyone?