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Monday, March 12, 2007

Still A Democratic Priority?

posted by on March 12 at 15:15 PM

A few weeks ago, I slogged about a Democratic bill that would codify Tim Eyman’s 747 (1% property tax cap).

I complained that handing Eyman a victory (especially when his 15 minutes have been over for about 20) seems like a dumb priority for this year’s whopping Democratic majority.

Certainly, property tax reform itself is a good idea (people on fixed incomes, for example, shouldn’t get hit with unwieldy property tax increases. Nor should poorer people be paying a greater percentage of their incomes in property taxes than rich people).

But locking in a system that jeopardizes local services and is failing to address people’s complaints anyway (747 has been in play since 2002) is an odd move for the Democratic majority.

So, I was pleased when the bills codifying 747 didn’t make it out of committee before the Feb. 28 and March 5 cutoffs.

However, word is: the the House Democrats still want to pass the Eyman law and they’re meeting in caucus this week to move it out—which they’re allowed to do with “dead” bills if they believe the bill is “essential to the budget.” Property taxes meet that test.

If Democrats are going to resurrect property tax relief, they shouldn’t rubber-stamp Eyman’s pseudo-populist fix. They should get real about addressing the system.

Voila: Enter the Washington Budget and Policy Center. Last week, they released an intriguing idea that the Democrats should take up in any renewed discussion of the Eyman bill.

The Budget and Policy Center is talking about a “circuit breaker” idea that would target property tax fixes. The idea works like this: When property tax bills reach a certain percentage of a homeowner’s income, they get a tax credit. The proposal developed by the Budget and Policy Center is, they claim, revenue neutral and would give the poorest 20% of homeowners a 14.9% tax cut; the next 20% would get about a 12% cut; the middle 20% would get a 1.9% cut; and the top 40% would see a 2% increase.

That’d be a nice change from the regressive setup of the current system: According to the Budget and Policy Center report, the poorest homeowners pay 6% of their income in property taxes while the richest bracket pays 2.8 %.

There’s more hope of moving the circuit breaker idea on the Senate side where the property tax relief bill is already more progressive than the House’s lazy idea of enshrining Eyman’s 747 into law.

The Senate’s idea would exempt the first $50,000 of a homeowner’s property value. Activists want to broaden that idea to include the circuit breaker fix.

RSS icon Comments

1

Good idea. They should also raise the homestead amount (currently 40K) in this state to match that valuation. You go bankrupt in this state you get to keep the first 40K of your equity. You go bankrupt in Florida and the entire property is exempt. Hence why OJ Simpson is playing golf in Florida- no way to take his house.

Posted by Dave Coffman | March 12, 2007 3:22 PM
2

What is misunderstood - or ignored- is unintended consequences. As property taxes are limited, cities become reliant on new construction to boost revenues, as it represents net addition to tax rolls, which causes more gentrification

Posted by flotown | March 12, 2007 3:28 PM
3

The property tax, like the gas tax, isn't as regressive as it seems, since the truly poor neither own their own homes nor drive, at least in urban areas.

Posted by MHD | March 12, 2007 3:28 PM
4

MHD, the poor live in apartments or rental houses, and as the cost of owning those structures rises, so does the rent. Making property taxes too high also raises the income level you have to reach in order to be able to afford your first home, meaning that even more people throw cash down the money pit that is rent for longer or possibly forever.

Posted by Gitai | March 12, 2007 3:34 PM
5

Good point on the Homesteader exemption.

And we heard that excuse when they wanted to rebuild SLU, Gitai. Say hi to all the low-income people there ... oh, wait, they all were moved out ...

Posted by Will in Seattle | March 12, 2007 3:37 PM
6

"Nor should poorer people be paying a greater percentage of their incomes in property taxes than rich people"

What gives you that idea? Of course, it's meaningless anyway, since you have to be "rich" to own property in this city.

Posted by m | March 12, 2007 3:37 PM
7

Look no further than California to see what a property tax cap like this can do to schools, infranstructure and emergency services.

I might have posted something close to that before, but bear with me. The cap is a bad idea.

Posted by Dougsf | March 12, 2007 3:50 PM
8

Gitai,

So are you suggesting that we reduce property taxes on apartment buildings? That's a good deal farther than what Josh is proposing, and I suspect (but could be convinced otherwise) that rents are driven more by demand than by the actual operating costs of the building.

High property taxes reduce what people are willing to pay on the actual mortgage, actually depressing property values. Not that that makes anything more affordable; it's just a transfer of equity from current homeowners to the government.

Reducing the property tax is the reverse: a transfer of wealth from the government to property owners. That doesn't sound too progressive, even with all the measures that Josh proposes.

Posted by MHD | March 12, 2007 4:02 PM
9

How about a effin' state income tax?

Posted by demolator | March 12, 2007 4:12 PM
10

Cool @9 - we can impose either a flat state income tax or a 1 percent income tax today.

Anything else requires a constitutional amendment. Which won't happen.

No exemptions either - read the State Constitution.

Learn it, Love it, Live it.

Posted by Will in Seattle | March 12, 2007 4:18 PM
11

A flat tax would be better than the regressive shit we have now.

Posted by keshmeshi | March 12, 2007 4:35 PM
12

Depends on what the definition of income is.

If it excludes stock options, and stock earnings, it would be worse.

Based on WA census data.

Posted by Will in Seattle | March 12, 2007 5:07 PM
13

oh, and dividends - don't forget those - right now they're capped at 15 percent federal tax, making the ultra-rich even richer.

Posted by Will in Seattle | March 12, 2007 5:09 PM
14

MHD @ 8 "High property taxes reduce what people are willing to pay on the actual mortgage, actually depressing property values."

Huh? Not sure how you figure this. Yes a high property tax increases the monthly mortgage payment making it more difficult for some folks...but given that property tax is deductible for a home owner, it should rationally not have much bearing on property values or on a decision to buy. Your purchase is being subsidized by other taxpayers. Just another example of how the poor pay more.

Every year at tax time when I claim that deduction I ask myself "and what's the problem with this again?"

The property tax debate is one that has been hijacked by the pseudo-populists (like Timmmyboy) and used to manipulate the not very bright.

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