I read with interest Frank Jacovini’s letter to the editor last week. Jacovini supports full valuation to assess a property for taxes so long as it is offset by other tax reductions that would make the tax revenue neutral.
To recap, Jacovini indicates that the idea is for the mayor and City Council to decrease the wage tax from 8.2 percent to 2.5. The other part of the plan is to switch to a land-valuation system where the land becomes more valuable than the improvements, or the home, on that land. This would eliminate, according to Jacovini, slumlords and investors buying land and sitting on it until the location goes up in value and they can sell it for a profit. Jacovini concludes by calling for us to press Council to reduce the tax rate and place caps on a tax increase for elderly on fixed incomes and for lower-income homeowners.
It is obvious you can’t have full valuation without a simultaneous cut in the wage tax. That shouldn’t depend on whether we can effectively pressure the mayor and Council to make the cuts, the change to full valuation should be made dependent on it being revenue neutral. Likewise, the caps on the tax increase for the elderly and the poor must be a mandatory part of any change that results in steep increases to the property tax.
All of that being said, no matter how you tinker with it, the property tax is inherently unfair. The idea your home or land goes up in value and adds to your worth is only valid if you sell the property. Placing a cap on that tax for people on fixed incomes sounds good, but many seniors supplement their incomes by working. Let’s say you cap their property tax based on attaining a certain level of income, just how eligibility is determined in the PACE program. If you make under $20,000 a year, your property tax is capped. What happens if your income goes over it by five or $10,000, does your property tax zoom up to full valuation? If it’s a tiered system, then you are adding to the complexity of the tax law. These are questions that must be answered satisfactorily before voters will support a change.
In my view, the only fair tax is one based totally on ability to pay. The flat wage tax is not fair. A sales tax is regressive. Only the progressive income tax passes the fairness test, assuming it is devoid of the loopholes in the current federal system. Unfortunately, Philadelphia is hamstrung by the state, as it is in so many other areas. The City can not implement a really fair tax so it is stuck depending on the wage and property tax. Thus, in order to ameliorate some of the unfairness of the property tax, they place caps on people living on fixed incomes, when it would really be a lot simpler to progressively tax income.
There has been talk of going to a full-valuation system ever since I can remember. It has always been resisted because voters don’t trust their representatives to offset the increase in property tax. The voters with the most clout live in the more affluent sections of the city and they are not going to buy the fairness issue. The question will be asked, if the change in the property tax is going to be revenue neutral, then do we really need to make the change? Many of the people getting screwed by the current system are the very ones who don’t vote.
It is true the city’s current property tax system results in real inequities. Mr. Jacovini is right to point out the commission’s plan to go toward full valuation is not some scheme to cause people to lose their homes. Perhaps the new mayor, during the traditional honeymoon period with the voters and Council, will be able to enact the three-part plan that would create some fairness in our property tax system.
The reality is that the next mayor will have a pretty full agenda. He will have to find a way to decrease the gun violence and attract new business and tourism. He will have to repair the city’s crumbling infrastructure. Where will improving the fairness of our property tax system fall? How much support will the three-part plan have? Will it be worth a new mayor expending his political capital to get done?
Making the property tax more fair is important. But how important is going to depend on the voters. I wouldn’t bet my house on it happening.
