Taxing politicians’ credibility . . .
It happens every year around this time. The weather becomes muggy, and taxpayers get mugged.
It’s not “liar, liar, pants on fire.” But it’s close. As hot weather settles in, so do cold, hard facts about government budgets. And with new budgets comes an all-too-frequent tendency for otherwise dedicated and honest officials to pull the wool over voters’ sweat-drenched eyes.
You’ve heard the lie a thousand times from politicians you probably thought were honest.
“We’ve managed to hold the line,” the lie goes, “keeping the mill levy the same and not increasing taxes.”
“Mill levy.” Those two words are the first clue that the rest of the sentence is steaming manure. Whoever speaks them is intentionally deceiving or isn’t bright enough to realize what he or she has done.
In one of its rare smart moves, the legislature has provided voters a clear measure by which to determine whether elected officials really have held the line on taxes.
It’s called the revenue neutral-rate. And although local officials love to characterize it as a costly gimmick that means nothing, it’s a real measure with real value.
Simply put, it’s the estimated tax rate a government should ask for if it truly wants to hold the line on taxes and spend no more taxpayer money next year than it spent this year.
County Clerk Tina Spencer is dutifully working on assembling a complete list of revenue-neutral and current tax rates, so we can’t yet examine them all. But we can look at one — the City of Marion’s — to see what it means.
In Marion, the estimated revenue-neutral rate for next year is 65.873 mills. That means the owner of a typical house, appraised to be worth of $100,000, would pay $757.54 in city taxes this fall as part of a much larger total tax bill, including taxes paid to the state, the county, the schools, the extension district, the hospital district, a library district, and (for some) a watershed district.
The $757.54 would give the City of Marion exactly the same amount of property tax revenue next year as it is getting this year.
But the city already has decided it won’t use that rate and instead probably will use what it deceptively has labeled as the same tax rate as this year’s.
That rate is 72.305 mills. It will, in fact, generate 9.76% more in property taxes for the city. For the owner of a $100,000 home, the tax bill for city purposes would swell $73.97 to $831.51.
Ah, but that’s the same amount as the owner paid last year, politicians will claim. Maybe, but not always.
The reason revenue-neutral rates tend to be lower than current rates is that property values increase. Politicians lead us to believe this is entirely because of new construction and improvements. But the majority of any increase in valuation may be simply because your house or business has been appraised as being worth more.
Let’s go back to one particular home and see what happened this year. Not a thing was done to that house during the year, but sometime this spring its appraised value shot up from $95,900 to $100,800.
If taxes are charged at the same rate next year as they were this year, the city tax bill for that house would increase by 5.11%. In other words, more than half the windfall the city would receive from increased valuation would come not from new construction or improvements but from inflation.
It’s also not as if the owner of the house would have access to the inflated value of his or her property.
In some communities, homeowners constantly trade up to bigger and more expensive homes and thus can benefit from inflated housing prices. But most people in our county are living in “forever” homes — the last homes they plan to occupy. They don’t plan to sell, so any supposed increase in wealth doesn’t make them more able to pay taxes.
It’s kind of like how we tax farms. Instead of taxing them on the value of land if sold, we tax them on land’s earning potential. Otherwise, farmers might have to cash in their land to pay their taxes.
Homeowners — particularly older ones on fixed incomes — are in the same predicament, but they don’t have as many lobbyists forcing local officials to show restraint and stick with revenue-neutral tax rates.
As budgets continue to be published each week in our Classified section, make note of which officials choose to truly hold the line and propose revenue-neutral rates.
Applaud them. Vote to re-elect them. Urge them to run against officials on other bodies that haven’t shown they care as much about the impact their tax rates may cause on actual taxpayers.
— ERIC MEYER