Bethlehem is blessed with a wealth of intelligent people, although scant few of them are in government. One of the brightest is Bill Scheirer, a statistical economist who used to work in D.C. At last night's meeting of Bethlehem City Council, he drew upon his experience inside the beltway to come up with a suggestion that could not only ease the impact of higher taxes on people with fixed incomes, but would do so without violating the Pennsylvania Constitution's very strict uniformity clause.
Perhaps the most troubling aspect of a property tax increase is the devastating impact it has on people with fixed incomes, most of whom are retired or disabled. Why not just exempt them? You can't because Pennsylvania's Uniformity Clause mandates that "[a]ll taxes shall be uniform, upon the same class of subjects, within the territorial limits of the authority levying the tax, and shall be levied and collected under general laws." The Constitution does allow the General Assembly to carve out a rebate for those of us with limited incomes, but it is quite limited.
He said that in the DC area, any property tax increase due to improvements made to the property goes into escrow and becomes due only when the property is transferred. He suggested that property tax increases could be deferred on seniors or those with limited income until their home is sold. They would still be obligated tp pay the taxes due before the increase.
Here's an example. Let's say your current property tax is $500 a year. The City approves a tax hike to $600. You would still be obligated to pay the $500, but could defer payment if the additional $100 until title to your home is transferred.
Bill's suggestion still runs afoul of the uniformity clause. But if this deferral option existed for everyone, it would withstand an attack because taxes would be uniform,
Most homeowners would likely pay the increase if they are working, but would have the option to defer if, in their opinion, they need that money. The city would still realize an increase in revenue and would have a basis for a very low interest tax anticipation loan because the money will come once the home in question is sold.
This idea is certainly worth a more detailed review. If the numbers work, they could make tax hikes a little more palatable.
15 comments:
It sounds familiar.
Signed Tom Selleck
This is a bad idea.
So the city would have to take out a “very low interest” tax anticipation loan to cover the amount of any increase that is deferred.
1). Interest paid will very quickly balloon to a large number as you could conceivably have people deferring their tax bills for decades.
2). What crystal ball are you using to forecast “very low interest” on such loans? Are you saying that interest rates will be low forever? Not likely. Rates are currently rising, and even if they weren’t even a low rate would still yield a large dollar amount when applied to an ever-increasing principal amount.
3). I guess you’re assuming that individuals will eventually have to sell their properties and settle up with the city then, since people only live so long. But what about properties owned by partnerships, LLC’s or corporations? Those entities don’t die and could theoretically live forever. How long (or how much) could be deferred by such entities and what would that cost in interest?
Those are just three very real problems off the top of my head.
In addition, it’s now December 6th and there is no way Bethlehem government (Administration or Council) has the expertise to analyze all the possible effects of implementing such a program and put it into place for the upcoming budget year.
Worst of all, while such a proposal seeks to soften the blow of a tax hike, it actually enables the overspending that is the real problem here.
The real solution is not that difficult to find - cut city spending. I would argue that focusing on finding areas to cut the budget - and the tax hike - would be a far more productive use of time than going down the road of looking at this gimmick.
I understand the frustration with a city government that is so out of touch with the very real consequences of their poor spending decisions. But unless voters in Bethlehem send a message to their elected officials, that likely won’t change.
Unfortunately for Bethlehem residents, you got what you voted for.
Bethlehem is a woke, hip, vibrant city that needs more money to fuel its woke and hip vibrance. Unhip old people are like Bethlehem Steel. They are no longer essential to the city's future. There are no walls confining them to Bethlehem. Detractors or those who can't afford the taxes, are free to leave. Wokeness is pricey. But hipsters can afford it and keep asking for more, as they just did, overwhelmingly, a few weeks ago. Cools places cost money.
Pennsylvania has a Property Tax Rebate that a taxpayer or renter can file for. It's based on the individual's income level so I can't provide a number.
How about a better idea. Don't raise taxes and instead cut expenses.
Yes, it’s minimal and tax-hiking cities and school districts gobbled that equivalent amount up years ago with ever-increasing tax rates.
All it did was enable more wasteful spending and still higher tax rates locally, but state politicians could say that they did something about it.
If THEY want to raid my wallet further, THEY must tell me that THEY have looked at EVERY line item in the current budget and all expenses.
There is always some FAT in ADMIN, both GOVT/SCHOOLS/ETC. In addition, NJ was running some articles about part time council members/govt members who are milking the proverbial "free health benefits" cow, even though p/t do not get this option (nor the option to be bought out by not taking said benefits). Many were successful DR/Lawyer/business owners, etc. Working full time at their real jobs.
Millions wasted on free loading NJ "council/etc" members. Can't beleive PA wouldn't have the same free loaders on board. Worth a story?
1:34, My suggestion that the city obtain low interest tax anticipation loans is probably dumb, but I like Sheirer's suggestion.
Being able to defer tax increases should be an option for people on fixed incomes, but making it an option available to everyone would remove uniformity clause exceptions.
Would most people pay or defer the tax hike? I believe the answer is that most would pay, but that needs to be studied. To encourage this, tack annual late fees onto the deferred increase. This can be justified bc they have to be managed. The late fees plus legal interest should make payment a more attractive option. But if a homeowner is simply unable to pay more bc of a fixed income, this should really help.
As for corporations and LLCs, you have a point. As a searcher, I see very few that own properties under the same corporate name for long periods. Many change their names quite frequently. That could be studied as well.
I'll have more to say in a few days.
Deferring the tax doesn’t change the fact that it’s enabling runaway spending. And since you admit that your low interest loan idea might not be the wisest option, any revenue deferred is going to be made up in real time by the rest of us.
This is not an area for government to expand into. What happens when someone has already mortgaged their home to the max and then defers their tax increases as well, to the point that the eventual sale proceeds exceed the amounts owed for property loans and taxes?
Who takes the hit - the government or the banks? While we’d all like to stick it to the bank, the reality is that it then makes the cost of borrowing money more expensive for the rest of us who are trying to keep our heads above water.
What you’re proposing will inevitably lead to a new, costly bureaucracy to determine which properties can safely defer their taxes (to ensure payback). Then that bureaucracy has to be funded as well.
Please stop thinking that there is a way to solve the problem of excessive government spending without cutting spending.
What you’re proposing really little different from having people go to a mortgage company to take out a home equity loan, or a reverse mortgage. That choice is already available to property owners without having the government set up their own costly program.
Council as well as the tax payers are being duped
I have worked with Willie and my experience has been that he is an entitled child in an adult’s body. Dare to express an opposing view and he’ll have a little tantrum. Challenge him on a policy and he will have a fit. Get the better of him and he will pout and walk away. Council is employed to be a watchdog, not a rubber stamp. Perhaps it better start playing the role of watchdog.
7:35 you hit the nail on the head. Reynolds is like Trump. If you disagree with him, he will be vindictive and retaliate. Except for Grace Crampsie Smith , not one other Council person understands their roll as a equal member of City government and as a watchdog for the tax payers and citizens.
While many people who understand government realize that Wille Reynolds and his progressive posse on city council are out of touch with the vast majorly of city residents, there is little you can do until Bethlehem breaks its inbred way of selecting it elected officials.
The current leaders are more concerned with neutering the police and making them non-offensive while ignoring fundamental city services. They are throwing the city from an owner occupied dominated stable community into a transient apartment heavy town. They are pushing for thousands of apartments built on every available square foot of the city. No consideration for the insufficient infrastructure to handle this massive increase in population. The new manager-leaders of Bethlehem are many nonresidents who have little concern beyond their own paychecks.
Why all the above is mentioned while regarding the beltway guys plan? His plan will allow these types of governments to increase taxes mote and claim you don't have to pay now; we will assess your heirs as a form of death tax property tax. Sorry, this is no solution to runaway government in the real world and smacks of ivory tower thinking.
Thank you.
Reynolds is really thin skinned. He has rabbit ears and easily flips out over even the smallest slight or questioning of him. I can't wait for the new council to get in so we can have some accountability and not people kissing Reynolds ring.
The last sentence of the 1st paragraph!
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