Posts Tagged ‘tax reform’

A Trenton-friendly Property Tax Reform Proposal

There are plenty of influences on our country’s economic development including geography, natural resources and luck. However, government policy plays a powerful but sometimes unseen role.

Over the years government policies have contributed mightily to the American landscape

  • The FHA loan program funded the suburban dream
  • School desegregation gave rise to white flight
  • Interstates made commuting possible
  • Rural Electrification made far flung settlements possible
  • Federal Housing projects enforced government ghettos

However one of the most powerful but least understood policies affecting cities and suburbs is the property tax structure.

A couple of illustrative examples make the point.

  • In Barbados, if you don’t paint your house it’s considered under construction and is taxed at a lower value. Therefore there were plenty of unpainted houses in the country.
  • In Philadelphia, houses were taxed by their width; therefore you see a lot of old narrow houses in Philly.

Today, most property taxes are based on the assessed value of a building. This is a progressive tax meant to more heavily tax the wealthy. However, by tying taxes to property value there is a built-in incentive to avoid property improvements. Therefore neighborhoods don’t improve like they might otherwise.

This is bad for both the payer and the collector. It’s expensive to continuously re-assess property values. In fact, it’s so painful, that Trenton rarely does it, making our revenue problem even worse.

Trenton’s property tax rate really hurts

Read the rest of this entry »