Saturday, September 09, 2006

Hey, leave Grandpa alone

Poor Dick Skrinjar:

“He’s a young guy too, you know,” Mr. Ravenstahl said, pointing to the number 7 and referring to Ben Roethlisberger, the 24-year-old Steelers star who last year became the youngest quarterback to win a Super Bowl ring. By his side, Mr. Ravenstahl’s press secretary — a white-haired man at least 30 years his elder — nodded quietly.

That comes from the New York Times via Rauterkus, who has a good discussion about something that Bob O'Connor, bless his soul, did wrong: When he was still on City Council, he lead the charge to eliminate the city's two-tiered property tax system, in which land was taxed at a higher rate than buildings. I doubt it's an issue the new mayor will revisit, but one can always hope.

20 Comments:

Blogger C. Briem said...

I have an unproven theory that the split tax that Pittsburgh had in the past was virtually nonexistant in practice. Most residential property prior to 2001 had assessments that set the value of land near 1/6th of total parcel value. Since that was the same ratio as the two tiers of the tax, the de facto difference between a flat and split tax was minimal. That would have changed with the new assessments however because much more variation in land values were set by the mass reassessment. The 'sticker shock' of that big change did it in at the time. BO was by far not alone in opposing it.

but there are a lot of reasons a split tax is worth considering. For all intents and purposes, a variation of the split tax has actually been put in place in Philadelphia via its nearly universal abatement on new residential construction in the city. It works out to being a split tax by another name is all. Some attribute a fair amount of Philly city revitialization to the implementation of that abatement.

9:27 PM

 
Blogger Sean McDaniel said...

damn, sometimes you're right on the money.

i know one of the reasons i don't move is that the house i live in is on roughly the same size lot as most other homes in my neighborhood and those nearby.

however, a lot of those lots have homes on them that cost a lot more...and pay more property and mostly school taxes.

can someone please tell me why renters don't pay school taxes (and please don't tell me that it's built into their rents. that is just plain BS.)

10:04 PM

 
Blogger Jonathan Potts said...

Thanks for the background Chris. And no, Bob certainly was not alone in the opposing the two-tiered system after the reassessments.

Sean, it's hard to imagine a municipality or a school district ever instituting a "renters tax" or billing renters directly for a share of property taxes. It is probably true that landlords do not recoup increases in property taxes through rents, because they have to keep rents competitive in the marketplace. Renters do pay wage taxes, however.

9:15 AM

 
Blogger Sean McDaniel said...

uh...i pay wage tax too. do you get some kind of break in brookline/beechview on that deal?

11:20 PM

 
Blogger Amos_thePokerCat said...

It is not BS, it is just a observation of reality. Renters indirectly pay school taxes. Or do you believe landlords are non-profit chairties?

How much, or little, is passed on depends on the marketplace, as JP already noted. But assuming (clearly a big assumption given the notorious incompetence of Allegheny County assesments) that similiar properties should have similiar property taxes, there would nearly equal increases in similiar rentals. Just numbers.

11:59 PM

 
Blogger C. Briem said...

apologies if this sounds like lecturing.. but whether the landlord or renter winds up paying a tax is a function of how elastic the market is for rental housing. If it's a tight rental market, tax increases are passed on to the renter.. if its a weak rental market then the landlords wind up eating such additional costs. So its not one answer as to who pays taxes. Probably different answers for different places within the region as well.

but that misses the point anyway. On average, your typical renter is using up a much smaller amount of housing... in value though I am sure it is true in sq. footage.. so the average property tax revenue collected per renter is a fraction of that per homeowner...

and the argument that their couldnt be a 'renter's tax because it would make a place uncompetitive is only half true.. wages taxes are not uniform and are taxes on residents that make certain places uncompetitive... may be one of the main reasons people continue to move out of the city for the suburbs in order to get out from under city and school wage taxes.. It was mayor masloff who wanted to lower the wage tax as a means to keep young families in the city.

8:22 AM

 
Blogger Jonathan Potts said...

I didn't mean to imply that a renters tax would make a place uncompetitive. (Though it might.) I just think that it's not terribly feasible politically, and that it might require some administrative hurdles.

The point about the wage tax is well made. I never lived in the city until I bought a home, and the chief reason was the wage tax.

8:50 AM

 
Blogger Dead Tree Eats Poop said...

This comment has been removed by a blog administrator.

7:29 PM

 
Blogger Dead Tree Eats Poop said...

JP,

I wanted to applaud your restraint. The end quote was a punned offering to a movie, "Cool Hand Luke."

Recalling that you're something of a cinema buff, I notice that you passed on the obvious allusions at your bloggish disposal:

1. Luke in the film is a mercurial loner, obstreperous and pretty.

LR is a ho-hum youngster, more taciturn than gregarious, who wears a pleated trouser (from a suit!) with a Steeler jersey. There might be some fashion bylaw against that in the Home Rule Charter. I'm still checking.

2. Film Luke commits a petty crime, only to find himself no better off than the trailman on a chain gang.

Mayor Luke escaped the nine-member chain gang to become hizzoner, albeit under the most tragic of circumstances.

3. Film Luke snorkeled eggs just to prove he could done 'em like a man.

Mayor Luke does the same thing, only with Diet Pepsi!

4. "What we have here is a failure to communicate."

Mayor Luke: "It's Dick's job to communicate. I have to decide what to wear in the luxury box."

7:30 PM

 
Blogger Amos_thePokerCat said...

My point was a broad one, and not really about the finer points about the marginal elasticity of rental housing. That school taxes are just another cost to a landlord, and that they all get factored into the rent to one extent or another.

There are only a few rental markets that I know of that are cheaper than mortgages. Some places in CA, mainly because of lower real estate taxes locked in because of Prop 13.

6:31 AM

 
Blogger C. Briem said...

Amos.. I dont mean to argue but no they dont. in some cases taxes are essentially paid for by property owners and in some they wind up being borne by the renter. Really, this gets to how all markets work. It is quite possible that a cost is mostly eaten by the landlord and not passed on to a renter at all. In fact I am quite sure that is much the case in many sections of the rental market within the city proper. In some neighborhoods, rents are quite low, despite high taxes and high costs. If the market does not bear the higher rent, landlords have no ability to pass on these costs.

This gets to a bigger point that smart economists have made to me that in fact the city's debt burden may actually be capitialized into city housing costs already. Which is important in understanding who has or will bear the costs of those debts at some point. but I intend to write on this at some point.

but on the point of wage tax forcing people out of the city.. the best insight into that came from this study, also old but still quite relevant. this report is: The Impact of the Earned Income Tax on Locational Decisions and the City of Pittsburgh. which I have scanned at:
http://www.briem.com/files/CityMigrationStudy1987.pdf

8:35 AM

 
Blogger Mark Rauterkus said...

Here is another theory: The land value tax (or some call the 'split tax') was taken apart by design over years.

Of course people were jacking with the system. Of course it was intentional. Of course there was need of continual corrections that had been nixed.

Ever hear of a 'tax freeze?' We've been frozen and re-frozen for years around here. The fix, a 'roll back' so that we look at values form five years ago as a base? That's not a fix it is a peek into history. And, it isn't valid (as of this week) by the courts.

The 1/6th theory of Chris B's is part of the whole slime ball theory of mine.

But, the root aim, the root mission, the root purpose of a land tax (or split tax) works. The execution failed at many instances -- but the baby got tossed out with the bathwater.

Sabre's numbers can not be defended. No way. The need for adjustments are pressing, then and now. But now, we could get it right and it won't help matters as we got it all wrong because the land value tax is OUT.

10:12 AM

 
Blogger Mark Rauterkus said...

By the way, a renters tax is also a "homestead exemption."

When you take away from one (home-owners) and / or OLDER home owners (Senior Homestead Exemptions) you put more of a burden on another.

Renters don't get a homestead exemption.

That's a tax on renters.

We're talking $70 per year or so. ?? It is about the cost of a 13th month of utilities for a renter.

10:15 AM

 
Blogger Dead Tree Eats Poop said...

An interesting point to remember is that there is a taxpayer net designed to capture falling rents in the rental marketplace.

HUD's Section 8 housing. It sets an artificial rent, with federal subsidies to furnish needed dollars, in neighborhoods past their residential prime.

Since it's a fixed rate by metro area (a sliding scale, dependent on the renter's income, which typically is light), the feds actually end up subsidizing property tax payments.

For the city of Pittsburgh, that means more than half of all residents in the HACP system is in Section 8. That's 20,000 Pittsburghers in 6,000 units!

Want to know who keeps the property tax lower than it probably should be?

HUD.

11:04 AM

 
Blogger Sean McDaniel said...

why don't take away all the labels and just call the tax on all residents in a school district a school tax?

i'll pay school taxes far longer than my kids ever where enrolled in the local district. but renters can't say the same.

and i don't think the tax should be based on the worth of whatever property the resident or residents might own or rent. it should be based on their incomes.

you know, if one of my kids gets a job and lives with me after high school (or college), i'm not going to charge him rent, but i'm not going to ask him for to pay for his "share" of the property tax either.

school taxes should be paid by all. why does it have to be more complicated than that? i pay for medicare and medicaid...and may never use either. i pay for weapons of mass destruction (and the search for the same) and really don't suupport either...but my taxes still cover.

property ownership should be removed from the school tax issue...the homestead expemption is there to give property owners a break because they're the only one directly paying for public schools.

by the way, where does that leave the business owner who can't pass along the property tax to renters...or maybe even his customers?

12:58 PM

 
Blogger Jonathan Potts said...

Chris can probably offer a more intelligent explanation of why property taxes are the primary revenue source for school districts and municipalities. Since property values tend to increase over time, or at least remain stable, they are, in comparison to wage taxes, immune from economic downturns. They also capture commercial wealth, as well as--indirectly, I'll admit--wealth from sources other than wages.

No tax is perfect, and you are going to have winners and losers no matter what system you use.

9:13 PM

 
Blogger Sean McDaniel said...

i don't see how a flat tax based on income (and we can use fed tax statements for that) produces winners and losers.

for the life of me i don't see the fairness of a $6-million a year football player living in a $1,200 a month ross township townhouse on mcknight road not paying a single cent in n.hills school or county taxes while a telemarketing call center manager making $42,000 a year pays $2,500 in county and school taxes to live in his 1,200 sq ft brick home less than a mile away.

can you explain that one to me?

11:33 PM

 
Blogger Mark Rauterkus said...

Land is easy to locate, hard to shelter. Land is an idea thing to tax as its overhead is clear for all to see. Administration of land-tax bills is far more simple than what the IRS does. If you own land, you can't hide it. A $6-million salary can be hidden in various ways.

When taxes hit upon personal income, privacy goes away. That's bad.

The ideal, perfect tax is the land tax -- given an urban setting like Allegheny County.

Land is limited. Government can't make more of it. And if one uses a lot of it, others have less. The marketplace forces in play with a land tax helps the overall good of the community and society.

Generally, I'm fine with localized school based property taxes. But wish it was more on land and less on buildings.

10:23 AM

 
Blogger C. Briem said...

that is really the answer. The property tax is ubiquitous at the local level in the US because it is easy to administer. Once an assessment is set, finding the land is easy and ownership is recorded.

11:41 PM

 
Blogger Joshua Vincent said...

Actually, (sorry to be late on this), the land value tax (LVT) had very different impacts in Pittsburgh. The ratio of land value to building value in, say, Homewood was large, sometimes 1/8th or 1/10th. After the Sabre assessment, the land share of Shadyside increased to 30 to 40%. That's where O'Connor managed to wedge himself into the issue.

Of course, the whole point of land tax was that good land use (downtown) was rewarded. Poor areas would be spared the tax man's hand.

Losing the land tax increased taxes dramatically downtown and, ironically, in the poorest neighborhoods.

that being said, the school tax negated many of the beneficial aspects of the city land tax. so, if it comes back, it should be with the school district doing it. Last July, the school district of Clairton adopted LVT, and it dropped homeowners taxes like a rock. the impact is greater, and sales of vacant land have increased - a good sign for getting Clairton off life support.
Josh

11:01 AM

 

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