Monday, June 04, 2007

City Council Should Not Enact Property Tax "Reform"

Today's JG has an editorial (is it really an editorial if you don't take a position?) about the upcoming city council debate regarding property tax reform. The General Assembly passed a new law that gives local government the ability to make changes to how the burden of property and income taxes is distributed. Mike Sylvester had a previous post that covered the 3 options:
1. Local Government can choose to not increase the property tax levy and can instead increase income taxes. If this option is chosen then the income tax would increase every year.

2. Local Government can increase local income taxes up to 1% and use 100% of this revenue to lower property taxes.

3. If a Local Governmental unit does both #1 and #2 above then they will be allowed to levy an additional local income tax of .25% to be used for Public Safety.

Now Mike gives his opinion in the post linked above and while I agree w/ most of his thoughts I thought I'd share my own. Options 1 & 3 should simply not be considered. They are, by definition, not revenue neutral and would amount to a tax increase which I am strongly against. I think our local government has enough money to operate and needs to find ways to create new revenue through economic growth and not increased taxation (which tends to stifle economic growth).

Option 2 has a few different facets to it and if the council were to adopt it then they would have to decide who gets the property tax reduction:
members would also decide whether the property tax break would go only to principal homes; to homes and rental property; or to all property, including that of business.

While option 2 may sound revenue neutral and thus a real possibility let me remind readers that voting for a new tax in hopes of reducing another tax always results in increased taxes. Keep this in mind during future council meetings when you hear the various members tell you how much this will benefit you. It won't. Ultimately it will give local government more money to spend which means you will have less to spend.

If they want to cap property taxes at a level lower than 2% (as Mike suggests) before instituting any of the above changes then maybe I'll listen. However, I seriously doubt they will consider such a move and thus we should not support ANY of the changes that will be discussed by the council...


Karen Goldner said...

I have looked at numerous scenarios for different types of homeowners (low income/lower property taxes, high income/higher property taxes, low income/higher property taxes, high income/lower property taxes) and I cannot find anyone who benefits from Options 1 and 2. Perhaps if you had NO income and were paying property taxes you'd come out ahead, but that is not a very large group of people. In general, it is a lose-lose situation for everyone.

The concept of using income taxes to offset property taxes isn't a bad one to consider, since income taxes are much more closely tied to ability to pay, but the options given by the legislature here aren't good - plus they are ridiculously complicated, as Councilman Pape pointed out a couple of weeks ago.

Because of this, I do not see the FW City Council adopting either option (but especially not Option 1, which is irreversible) this year.

Jeff Pruitt said...


Thanks for the comment on your analysis.

Using income taxes to offset property taxes is not a bad idea in and of itself. The problem is there is nothing (in this legislation) to keep property taxes in check after the increase in income taxes. Inevitably property taxes will go up and then we'll be stuck w/ higher property taxes AND a higher income tax.

I hope you're right and the city council doesn't adopt either measure...