Its Hard To Be An Optimist

Last night I attended a neighborhood civic association meeting.  The speaker was the Philadelphia City Comptroller, Alan Butkovicz.  The subject was the “ins and outs” of the proposed change in city real estate taxes.

The City has proposed changing the basis of assessing real estate taxes to 100% of market value.  In this change, some residents will pay more, others less, and most about the same, we are being told.  Butkowicz pointed out that this political process is fraught with opportunities for certain groups to escape taxes while others will experience huge hardships.  In the worst of cases, communities within the Philadelphia boundaries may go into decline because long time residents can no longer afford to live there.

The Comptroller’s message was that this revamp was not in anyones best interest.  Our civic association should become active and attempt to convince City Counsel to reject the real estate tax change.

Let’s catch out breaths.  Why is there a need to change anyway?

The City needs more revenue to cover looming School District budget shortfalls.  Property taxes are the main source (but not the only) of revenue for schools.  The City could increase again millage on the current assessed real estate values, or it could change the basis upon which the tax is figured.

Under the 100% valuation model, the “millage” (percent of real estate value) would decrease even if someone was paying more totally in taxes.  A politician could proclaim, “under my watch real estate taxes decreased” while still bringing in the extra money needed for the schools.

When the Comptroller was asked whether he favored simply raising the millage on the current real estate values, he launched into another “political speak”, saying in effect, that there were inequities in that approach too.  So what is the path forward?

We need to cut spending, was his reply.  Heard this before?

Doesn’t this dialogue sound a lot like the National argument going on in Washington?

We are routinely spending more than we collect in taxes.  There is almost universal agreement that spending must be reduced.  (There is almost no agreement on what needs to be reduced.)  Many support higher taxes but who would pay more taxes has no consensus.

Today the government spends lavishly on various segments of Americans.  The poor get support from a variety of government safety net programs.  The middle class get Medicare and Social Security.  And the wealthy get a load of juicy tax cuts.

Our Congress is totally deadlocked on how to eliminate the deficit with certain Congressional members defending the interests of each of these groups.  No compromise, just status quo.

Commonsense tells us that a compromise where some entitlement and safety net programs are eliminated, others reduced with means testing, and still others are redesigned to operate at lower costs.  In a similar manner, Medicare and Social Security look ripe for means testing and some modifications (like the age onset of benefits).  Tax policy is just as clear once the argument on whether taxes should be regressive or progressive is settled.

While some will get hurt with these changes, the number of hardships can be minimized if the deficit is reduced by the combination of tax increases AND spending reductions.  In Philadelphia, the real estate issue must balance the needs of long time residents whose homes now reside in more gentrified areas with the promises made to wealthy residents who have purchased expensive condominiums with 10 year tax abatements.

In Washington as well as Philadelphia, it should be clear that what can’t be done is to do nothing.  But it is hard to be an optimist.

 

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