Someone Really Wants You to Know Your Taxes “Could Go Up 7 Percent”

The question of “why is this news” was probably lost when your eyes bulged out of your head.

From an article in The Courant today:

If no programs or personnel are cut and state aid doesn’t increase, residents will likely be facing a tax hike of about 7 percent in fiscal year 2009-10.

The town council and school board will host a community summit Jan. 28 to begin identifying which services to preserve and which to cut, and to spell out what local officials can and cannot do with respect to union contracts, property revaluation and other issues.

“We think that 7 percent is unacceptable, but it’s going to take significant program cuts to lower it,” Mayor Scott Slifka said Tuesday. “The changes could be dramatic, and the community needs to be part of that discussion.” …

Hoping for a large turnout, officials are seeking participation from business owners, parents, union members, the Exchange and Rotary clubs and other fraternal groups, the West Hartford Taxpayers Association, which has opposed the last several budgets, and West Hartford FIRST, which has supported those budgets, particularly in the area of education funding.

The whole thing catches me a little bit short — the announcement of such a startling “possible” tax increase could simply be an effort to increase turnout at the January 28th meeting (to really listen to the community and to seek help from the community — a “people, help your government with this problem” moment). In that case, it’s a beautiful example of democracy. In an election year, however, a 7% tax increase seems unlikely (and we already know where some budget cuts can be made — like leaf collection). This makes the cynical voice in my head say “How do you get people to swallow a 3.5% tax increase? You tell ’em you’re going to increase their taxes 7% first.” Or maybe, since no one likes cutting programs and personnel, this is a wake up call to that necessity, or, at best, a way to make that necessity more palatable (or politically safe). Or maybe it’s just a way to ratchet pressure on the state — one of the above “ifs” is “if state aid does not increase.” This seems equally likely considering there is likely going to be state aid coming from Washington soon (though I’m not sure it will be here soon enough for the start of the West Hartford budget making season).

The WHTA is encouraging the Council to reject the new teacher contract (which ensures raises, above and beyond step increases, of 1 and 1.25 percent — which, as I figured in some post somewhere else, is about the cost of a year of leaf collection). The Council seems unlikely to do so. Asking the union to accept a pay freeze or a step freeze for academic year 09-10 doesn’t seem unacceptable to me, but there would have to be a a significant payoff (in pay or step increase) down the road. And it would be unfair to ask teachers to take a pay freeze if other town employees don’t take the same pay freeze (granted, with union contracts, such equal “treatment” of all employees is likely impossible).

So. Yeah. Your taxes “could” go up 7 percent. What’s the strategy behind news like that?

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Are Property Taxes a Feasible Basis for Town Revenue?

When taxes get out of hand, people get really pissed off.

This is one of the fundamental historical narratives of the United States, one of the most compelling arguments for limited government and a contemporary local theme in towns far beyond West Hartford’s bubble. And while the panicky language associated with current events (we had the “tax revolt” in California a while back, and the NYT referred to West Hartford as being on the verge of “tax revolt” – this only serves to highlight the degree to which revolution is misread beyond its borders) may only serve to point out how far we have to go before we get really angry, there’s no question that the sentiment that taxes outstrip services is real, especially in West Hartford. And you know what? It’s true that people who have lived in West Hartford for many, many years are being forced out by property taxes, and that’s something that, as residents, we can’t ethically abide. But we also can’t ethically abide cuts in crucial town services (police, fire, education) if those cuts create a real negative impact on the lives of any of our residents. And that leaves us with the ugly question which has too often framed our budget debate – how do we protect vulnerable homeowners without gutting the services that keep the quality of life in West Hartford so high?

The Problem is Property Taxes

So, I’ve spent a lot of time thinking about this, and a lot of time reading about this, and here’s the conclusion I reached – the problem is not the taxation itself but the mode of taxation.

Last month I was thinking about my retirement account, and wondering, as the market crashed and burned, where my money was going. And the answer hit me (I guess it’s obvious, but I’d never spent much time thinking about it before) – the money was never really “there” to begin with, it was only “potentially” there. If I had cashed out when the market was at 13,000, I could have had that money (with taxes!), but in lieu of cashing out, the gains I was making were really potential gains that existed for about as long as a Higgs boson in the CERN collider. The money was only there if I chose to realize its potential – otherwise it was just a number that had the potential to become a different number –an abstracted abstraction, despite the dollar sign on my quarterly statement.

It’s the same way with a house, but here’s the rub. Let’s imagine the situation of the many West Hartford residents who bought a house here in the 70’s for about $30,000. Although their homes have gained value, unless the home is sold, that value remains only potential profit, not actual profit (excepting home equity loans and reverse mortgages). But real property taxes (not potential taxes) increase as potential value increases, so a person who paid $30,000 for a home may very well be paying that much in taxes today over a five year period. In other words, these homeowners pay as much in taxes in five years as they have invested in the ownership of their home (at my current tax rate, it will take about 40 years for me to reach the cost value of my home in tax payments, assuming taxes don’t go up (ha!)). This creates situations where actual taxes meet potential values but may outstrip actual incomes, and leads me to the conclusion that it’s dangerous to base a town’s tax revenue on non-liquid assets, especially when those assets are of imaginary value (potential value if you’d prefer). It’s at the very least a system that discourages (or penalizes) long-time home ownership and long-time contribution to a community. And let’s face it – that’s pretty shameful (“you can’t eat the orange and throw the peel away,” etc.).

So, Alternatives?

So, let me throw two potential solutions at you, and you can tell me what you think.

1. Rather than a property tax (which taxes potential and unrealized profit), why not tax the real profit of our residents – our income? A graduated town income tax (replacing a property tax) would require those who make the most money to give the most back to their town, regardless of the home they own or the car they drive. Tax rates could be set to realize the same revenue (I know nothing about how to do this, but I’m sure it could be done) by imposing higher taxes on the highest-income residents (who would stay in the town for the same reason residents with large property tax bills stay – for the quality of life). Residents with lower incomes or fixed incomes would be protected, town revenue would be protected, and, theoretically, no one would be forced out of town.

2. Institute a local sales tax to make up any difference in revenue. The sales tax wouldn’t need to be severe – it could be 1 percent on all purchases over $50, or half a percent on purchases over $100, or something like that. If West Hartford is a boutique shopping destination (and it is, between the Center, BBS and Westfarms), it won’t likely suffer a loss of business to other local competitors (who competes with Crate and Barrel, and would a half percent tax at Crate and Barrel really keep anyone away?). One dollar on a two hundred dollar purchase would be a drop in the bucket for someone who is in a position to make that purchase, but it would be another dollar of tax relief for residents and another dollar toward our quality of life. And as inflation becomes a greater problem (and with all this money we’re printing, that seems like a given), we’ll have a small, tractable hedge against that inflation.

I’m no economist and I’m certainly no financial expert (I might have weathered “market conditions” better otherwise), and I don’t mean to argue that spending cuts aren’t real and necessary (the days of leaf collection are over, folks), but these seem like some common sense, big picture solutions to our budget debate. In all of our bickering about mill rates, perhaps we need to realize that the problem isn’t necessarily the taxes – it’s that we’re choosing to tax potential profit rather than realized income.

Second West Hartford Budget Referendum One Week from Today

I hereby call to order an online Town Meeting.

One week from today, about 12,000 of us (if we’re lucky) will go to the polls and fill in the circle for “No” or “Yes.” We’ve heard from the folks at West Hartford FIRST and the WHTA, so now it’s your turn:

How do you intend to vote on the West Hartford budget referendum next Tuesday, October 7th (“No,” “Yes,” or “Undecided”), and why?

You get 5 minutes with your text box, max. And while established voices are essential, I’d love to hear from some new voices, too.

Closing Firehouse Number One

Directions:
Please select the answer that best completes the following sentence.

The potential closing of firehouse number one is:

A). A cheap get-out-the-vote tactic.

B) A reasonable way to create savings for the town without greatly impacting town services.

C) Going to negatively impact response time to the crises of our neighbors (and perhaps ourselves).

D) A short term solution to a long term problem.

E) Pumping more hot air into the self-righteousness of those who resent contributing to the common good.

The Taxman Came, And He Billed Me in Ethics

So, like the rest of you, I got my tax bill this past weekend. 2 cars and one house later, we’re feeling the pinch. We’ve got an ’03 Corrola (which seems to me to be taxed reasonably) and ’07 Prius (which is taxed at an out-of-this-world rate) and an oldish, smallish house (we’re raised ranch people, not McMansion people), which I also think is taxed pretty reasonably. If you’re living in more house than you can afford, or if you’re living in a house you can just barely afford, or if you’ve recently experienced a significant drop in income, I can see how these property taxes could really push you to the brink.

I guess I’m just sort of conflicted about our current situation, West Hartford. When I look at the national sub-prime fiasco – the over-valuation of homes and the predatory lending –there’s an undeniable voice (a cynical, nasty voice I don’t like very much) in the back of my head that says “If you can’t afford the taxes on your house, you shouldn’t have bought the damn house.” But I also recognize that tax rates are literally forcing long-standing residents out of our town, that a house that was once affordable for a family or couple no longer is. And of course by living in a place for a long time – whether it’s a home or a town – you take ownership over that place (it becomes yours, in deed and idea). That taxes (alongside ARMs and crashing portfolios) are forcing some folks out of town is a shame – while my wife and I are living within our means at the moment (as soon as I write that the image of the tax bill for the Prius floats before my eyes), it’s certainly true that, across the crooked, potholed roads of our lives, our means (and our taxes) will always be in flux.

Here’s a confession: I grew up in West Hartford, and when I was 18, I took off and said I “I’m never coming back.” As far as I was concerned West Hartford was snobby and stuck-up – a town where the only thing more difficult than starting a conversation was finding a way not to be judged. I came back to West Hartford 3 years ago (after 10 years away – it’s a long, non-bloggy kind of story) and found a town that, via the services it provides, really does try its best to take care of its residents. And beyond our diversity – which is probably our town’s greatest strength (as much as some love to tout our bond rating) – it’s really our services that make West Hartford a wonderful place to live (and to raise kids). We have 6 wonderful parks (and, incidentally, 6 pools), we have responsible police (and, I might add, a day-to-day safety we take for granted), we have a great fire department, lights-out teachers, three great public libraries (with great librarians) and two senior centers. In other words, we complain a lot, but, most days, I feel like we’re getting our money’s worth.

And I could easily end this post with that optimistic feeling. I mean, it’s genuine. I could write:
“So, like anybody else, while I’m writing checks to the town this month, I’m not going to be very happy (I’m cheap, ok – I’m one of those “add water to the ketchup to get all of it out” people. I use a bar of soap to its molecular level). At the same time, the taxes we pay aren’t just taxes … they’re fees for services rendered. And while we can certainly have an argument about whether the cliché “you get what you pay for” applies to government spending, when I look at my total half-assessment on my property taxes (there’s that Prius bill again, floating behind my eyes), I still feel like, in West Hartford, I’m getting good value for my money.”

And you know what? I really believe that.

But it’s romanticism all the same, and a kind of romanticism I can only allow myself to believe so far. And while I love West Hartford, and while I’m currently able to pay my taxes and take advantage of town services, I can’t ignore the fact that not everyone is so fortunate. And so, looking at my tax bills, I’m left with a simple, but I think difficult, ethical question:

To what degree are you and I responsible to help those who find themselves being priced out of town (whether through their own poor planning or through unpredictable financial circumstances), and, if we are responsible (we are all responsible for our neighbors, yes?), what on earth do we do about it? Where do we draw the line between the services that make our town a wonderful place to live and the ethical compulsion to make sure that those who want to live here can live here?

More simply: My taxes? They’re not too high. They’re fine. But Willy Loman’s long standing point resounds today as much as it did in 1949; “You can’t eat the orange and throw the peel away …”

West Hartford, Here’s What Your Mill Rate Would Be …

A longer post on taxes tomorrow, but for now, a simple question of tone.

Our mill rate right now is a fairly craptastic 37.09 (I can’t find figures for tax year 2007, but I’m pretty certain that’s in the upper tier of mill rates for the state). Ok – you live in (or move to) West Hartford knowing the mill rate is going to be high. So what’s the deal with putting the above pictured on our tax bills?

Call me tone deaf if you will, but am I supposed to feel grateful, threatened, or something else entirely?